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I am trying to wrap my head around. I understand the concept of x*y=k vol. when we are calculating this we can get the price but there’s also an exchange price, say eth. That means the pool will have 2 eth prices (?) one from the pool, one from the cex. Do we assume that there’s always arbitrage? If so, why do examples always pull in external prices?

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  • Which examples?
    – kfx
    Commented May 24, 2022 at 14:03

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It just depends on what you're trying to do. A lot of time you can just use the pool price as your oracle, but there are some issues if you don't use a twap (flash loans) and even if you do, you need a lot of liquidity or you'll be subject to manipulation. If the majority of the liquidity is on a cex however, it makes it much more robust to just grab price. Of course, then you may have oracle risk, but its really a design decision you'll have to make in your smart contracts.

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