Automated Market Maker (AMM)

An Automated Market Maker (AMM) is a protocol used in decentralized exchanges (DEXs) to facilitate trading without relying on a traditional order book. Instead of matching buyers and sellers, AMMs use liquidity pools, where users provide liquidity in pairs of assets. The price of assets is determined by a mathematical formula, and liquidity providers earn fees from trades. A popular example of an AMM is Uniswap, where users can trade tokens directly from their wallets without needing a centralized intermediary.