Information
What Is an Automated Market Maker (AMM)?
An automated market maker uses predefined smart-contract rules and liquidity pools to facilitate trades. Learn the core concept and how an AMM differs from a traditional order book.
Pools and pricing rules
An AMM uses assets supplied to a pool and a pricing mechanism to determine trade outcomes. Different AMMs and pool types use different formulas and design choices.
The role of liquidity providers
Liquidity providers contribute assets under a pool’s rules and may receive a share of trading fees. Their results depend on fees, price movement, pool mechanics, and costs.
Limits and risks
AMMs do not guarantee deep liquidity or stable prices. Large trades can have substantial price impact, and liquidity providers face smart-contract and market risks.
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