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What Is an Automated Market Maker (AMM) and How Does It Facilitate Trading on a DEX?

An AMM is a robot market maker that uses a math formula and a pool of tokens to set prices, instead of an order book.
Greeks.Live23.11.25

What Is an Automated Market Maker (AMM) and How Does It Facilitate Trading on a DEX?

An Automated Market Maker (AMM) is the underlying protocol that powers most decentralized exchanges (DEXs), replacing the traditional order book used by CEXs. Instead of matching buyers and sellers, an AMM allows users to trade against a pool of tokens, known as a liquidity pool.

The price is determined algorithmically by a formula based on the ratio of the two assets in the pool. By providing liquidity to these pools, users can earn fees from the trades that occur within them.

How Does an Automated Market Maker (AMM) Differ from a Traditional Order Book Exchange?
How Does an Automated Market Maker (AMM) Work?
Do Automated Market Makers (AMMs) in DeFi Have an Equivalent to a Traditional Order Book?
Explain the Concept of an Automated Market Maker (AMM)

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