Automated Market Maker

An Automated Market Maker (AMM) is a decentralized system that facilitates trading on cryptocurrency exchanges by providing liquidity through crypto liquidity pools. Unlike traditional exchanges, AMMs do not rely on order books or market makers to match buyers and sellers.

Instead, they use smart contracts to define the price of digital assets and provide liquidity, allowing users to trade directly with the liquidity pool. AMMs incentivize users to become liquidity providers by offering a share of transaction fees and free tokens. This approach enables 24/7 trading, eliminates the need for intermediaries, and promotes autonomy in the crypto space. Popular AMMs include Uniswap, Balancer, and Curve, each with its approach to liquidity provision and pricing mechanisms.

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