Automated Market Maker (AMM) - Page 5

An automated market maker (AMM) is a decentralized trading system that uses algorithms and liquidity pools to facilitate asset exchanges without traditional order books. Instead of matching buyers and sellers, AMMs allow users to trade directly against pooled assets governed by mathematical formulas. Liquidity is provided by users who deposit token pairs into smart contracts and earn fees in return. Prices adjust automatically based on supply and demand within the pool. Automated market makers are commonly used in decentralized exchanges. They enable permissionless trading and continuous liquidity.