Curriculum·S201 Market Structure and Price Formation·about 31 min
AMMs vs order books
By the end of this lesson you can
- →Explain how a constant-product pool sets a price without anybody quoting one
- →Compute price impact from pool reserves, and show why it is a function of trade size against depth
- →Describe how transaction ordering converts a public pending trade into an extractable position
- →Choose between venue types for a given trade, and set the parameters that bound the outcome
Sophomore · enrolled learners
This lesson opens with The $220,764 sandwich, March 2025.
- What happened
- On 12 March 2025 a trader swapped $220,764 of USDC for USDT on a Uniswap v3 USDC-USDT pool holding about $19.8M, and received $5,271 of USDT; Cointelegraph reported the swap completed in eight seconds. By the account of Michael Nadeau of The DeFi Report, an MEV bot front-ran the transaction by swapping all the USDC liquidity out of the pool, so that the victim's swap executed against drastically worsened reserves, and then put it back after the swap executed. More than $215,500 was extracted, of which the bot tipped about $200,000 to the block builder bob-the-builder.eth and kept about $8,000. A DeFi researcher, DeFiac, said internal tools showed the same trader sandwiched six times across different wallets, with funds traveling from Aave beforehand, and DefiLlama's founder speculated that a deliberately extractable transaction could be a way to move illicit funds. Neither claim was confirmed.
- The decision point
- The trade was between two assets that are supposed to be worth the same thing, on a pool holding about $19.8M, and it lost 98 percent. Nothing was hacked and no contract misbehaved. The pool priced the swap against whatever its reserves were at the moment of execution, and the ordering of transactions inside the block, which the trader did not control and could not see, determined what those reserves were.
- Recorded loss
- $215,000
What you will be able to answer
- →How does a constant-product pool set a price?
- →What determines price impact in a pool?
- →What is a sandwich?
- →What bounds the outcome of a pool trade?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://cointelegraph.com/news/crypto-trader-loses-least-215000-stablecoins-from-sandwich-attack
- https://blockonomi.com/crypto-trader-loses-215000-in-mev-sandwich-attack-on-uniswap/
- https://developers.uniswap.org/docs/get-started/concepts/liquidity-providers/concentrated-liquidity
Confidence medium·Volatility medium·Reviewed 2026-10-22·Owner unassigned
Contested
The researcher DeFiac said internal tools showed the same trader sandwiched six times across wallets with funds traveling from Aave, and DefiLlama's founder 0xngmi speculated that a deliberately extractable transaction could be a way to move illicit funds. Cointelegraph reported both as speculation. That interpretation is unproven and the mechanism is identical either way. State both and rest the lesson on the mechanism.
Extraction and builder payment figures come from on-chain reconstruction by researchers, principally Michael Nadeau of The DeFi Report as reported by Cointelegraph and Blockonomi, and vary slightly across accounts (Cointelegraph gives both over $215,000 and over $215,500). The 98 percent loss on the victim's swap ($5,271 returned on $220,764) is the stable and load-bearing figure.
Mitigations in this area, including private submission routes and pool designs that resist extraction, change quickly. Teach the mechanism and check the mitigations at each review rather than naming current tools.