Automated Market Maker
Also known as AMM AMMs
An automated market maker, or AMM, is a type of decentralised exchange that prices trades using a mathematical formula and pools of tokens instead of matching buyers and sellers. Traders swap against the pool, and the price shifts as the balance of tokens changes. Liquidity providers deposit tokens into the pools and earn a share of trading fees, while taking on risks such as impermanent loss.
Related terms
- Liquidity Pool Tokens pooled in a contract to enable trading or lending. DeFi
- Impermanent Loss The cost to liquidity providers when pooled token prices diverge. DeFi
- Maximal Extractable Value Profit captured by reordering or inserting pending transactions. DeFi
- Liquid Staking Staking while receiving a tradable token for the staked deposit. DeFi