Automated Market Maker (AMM)

An Automated Market Maker (AMM) is a type of decentralized exchange (DEX) that pools liquidity and prices its cryptoassets using algorithms, often via a bonding curve, to enable low-friction trading access. AMMs rely on liquidity providers to provide liquidity into pools and achieve price discovery through a constant product function rather than an order book model. The discovery mechanism considers the relative composition of assets in a pool for a pair of assets traded.