Automated Market Maker (AMM)

What Is an Automated Market Maker (AMM)?

When it comes to cryptocurrency, Automated Market Makers (AMMs) are typically used by decentralised exchanges (DEXs). AMMs are a way for DEX users to trade without an intermediary, as they allow trades to happen seamlessly. This is possible since AMMs replace traditional order books that connect buyers and sellers with liquidity pools.

Liquidity pools are funded by DEX users themselves, who are incentivised to do so because they earn a portion of all the fees generated by the DEX. In short, users provide their assets, which are used for trades on the DEX.

There are several DEXs that currently use the AMM system, including Uniswap, VVS Finance, and Spookyswap.

Key Takeaway

Automated Market Makers (AMMs) are a way to provide liquidity to a cryptocurrency exchange via automated trading.

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