How Does an Automated Market Maker (AMM) Function on a DEX? ▴ Learn

How Does an Automated Market Maker (AMM) Function on a DEX?

An AMM is a protocol that uses a mathematical formula, rather than a traditional order book, to determine the price of assets and facilitate trading on a DEX. Liquidity providers deposit pairs of assets into a liquidity pool, and the AMM's formula ensures that the pool's ratio remains balanced as trades occur.

This allows for continuous, permissionless trading.

Do Automated Market Makers (AMMs) in DeFi Have an Equivalent to a Traditional Order Book?

What Is the Function of an Automated Market Maker (AMM) in Providing Liquidity to a DAO’s Treasury Assets?

What Is an Automated Market Maker (AMM) in the Context of a DEX?

What Is the Role of an Automated Market Maker (AMM) in a DEX for Perpetual Futures?