Launched in November 2018, Uniswap’s AMM uses the now-familiar constant-product invariant. Uniswap allows users to create pools consisting of ETH and any ERC20-compatible tokens with the following relationship.
x * y = k
where x – balance of ETH
y – balance of ERC20-compatible token
Although the Uniswap approach is simple, effective and gas efficient, it suffers from impermanent loss. Several subsequent approaches have been adopted to mitigate or avoid the issue of impermanent loss.