Part 1: A brief overview of 1st generation AMMs

Such a feature makes liquidity providing extremely easy and basically spurred on the DeFi revolution because now every Joe or Jane can become a market maker, where in the past that job was reserved to big financial institutions.

By providing in this matter, you can provide liquidity for the entire range of prices (i.e. [0, ∞]) and always have both assets to execute trades.

The basis of Uniswap is the constant product formula, x * y = k, where x is the quantity of asset X, y is the quantity of asset Y and k is a constant. Each pool therefore only comprises of two assets X and Y and this formula ensures the ratio of both are equal.