Question

What is an automated market maker (AMM)?

Answer 1

An automated market maker (AMM) is a type of decentralized exchange (DEX) protocol that relies on mathematical formulas to create and maintain liquidity pools. AMMs use algorithms to automatically set prices based on the ratio of assets in the pool, allowing users to trade digital assets without the need for traditional order books or matching buyers and sellers manually. Popular examples of AMMs include Uniswap and PancakeSwap.

Answer 2

An automated market maker (AMM) is a type of decentralized exchange (DEX) protocol that allows users to trade cryptocurrencies without the need for traditional order books. AMMs use smart contracts to create liquidity pools that enable users to swap tokens directly with the pool instead of relying on buyers and sellers to make trades. AMMs determine token prices based on an algorithmic formula, such as the Constant Product Market Maker model used in Uniswap.