The Liquidity Challenge

One of the primary challenges blockchain projects face upon launching a new token is liquidity. The traditional order book model, similar to what's applied in the New York Stock Exchange for pink sheet stocks, often proves inefficient due to its inability to guarantee immediate buy-sell transactions.

Uniswap V2 was developed to address this, introducing a liquidity pool governed by smart contracts, wherein the token price correlates with the internal pool ratio. Although this tackled the basic liquidity issue, it brought about excessive volatility, particularly when initial liquidity was limited.