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Explain the Concept of an Automated Market Maker (AMM)

An AMM uses a mathematical formula and liquidity pools instead of an order book to determine asset prices and execute trades.
Greeks.Live07.11.25

Explain the Concept of an Automated Market Maker (AMM).

An AMM is a type of decentralized exchange (DEX) protocol that relies on mathematical formulas and liquidity pools, rather than a traditional order book, to determine the price of assets. Users supply tokens to the pools (becoming liquidity providers), and the AMM algorithm executes trades against this pooled liquidity.

What Is an Automated Market Maker (AMM) in the Context of a DEX?
How Does a Decentralized Exchange (DEX) Function without a Central Order Book?
Explain the Difference between an Order Book Model and a Constant Product Formula Model for Liquidity
What Is an Automated Market Maker (AMM) and How Does It Differ from a Traditional Order Book?

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