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Automated market maker: definition and meaning

An automated market maker (AMM) is a decentralized exchange design that prices trades using a formula and pools of tokens instead of an order book.

Why it matters

AMMs let anyone trade or provide liquidity, but trades can suffer slippage and liquidity providers can face impermanent loss.

Related terms

• Liquidity
  Liquidity is how easily an asset can be bought or sold without moving its price much.…
• Slippage
  Slippage is the difference between the price you expected and the price you actually got, …
• DeFi
  DeFi, short for decentralized finance, is a set of financial services such as trading and …

Educational content only, not financial advice.