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What Is the Primary Function of an Automated Market Maker (AMM) in Decentralized Finance (DeFi)?

To provide continuous, algorithmic liquidity for token trading pairs on a DEX, replacing the traditional order book.
Greeks.Live06.11.25

What Is the Primary Function of an Automated Market Maker (AMM) in Decentralized Finance (DeFi)?

The primary function of an AMM is to provide continuous liquidity for trading pairs on a decentralized exchange (DEX). It does this by using a mathematical formula, like $x y = k$, to determine the price of assets based on the ratio of tokens in its liquidity pool.

This eliminates the need for traditional order books and centralized intermediaries. It allows users to trade instantly and passively earn fees by contributing assets to the pools.

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