Glossary
Automated Market Maker (AMM)
A smart-contract-based exchange that prices trades from on-chain liquidity pools using a deterministic formula instead of a matching engine.
An automated market maker (AMM) replaces the order book of a
traditional exchange with a pool of two (or more) tokens and a pricing
formula. The classic Uniswap v2 design uses the constant-product
invariant x * y = k: as a trader pulls one token out, the price of
that token rises along the curve.
AMMs let anyone trade against the pool 24/7 without a counterparty, and let anyone deposit liquidity to earn a share of trading fees. Variants — concentrated liquidity (Uniswap v3), stable-asset curves (Curve), weighted pools (Balancer) — adjust the curve for different asset profiles.