Automated Market Maker

What is an AMM?

A type of Decentralised Exchange. Contrary to traditional limit order-book-based exchanges (which maintain a list of bids and asks for an asset pair), AMM exchanges maintain a pool of capital (a liquidity pool) with at least two assets. A smart contract governs the rules by which traders can purchase and sell assets from the liquidity pool. The most common AMM mechanism is a constant product AMM, where the product of an asset X and asset Y in a pool have to abide by a constant K.

Examples of AMM Exchanges include Uniswap, Sushiswap, Balancer.