Automated Market Maker — a smart contract that prices and executes trades using a mathematical formula rather than an order book. Uniswap, Curve, and Balancer are the canonical examples. AMMs let anyone provide liquidity (LP) by depositing two tokens into a pool; the pool prices trades based on its reserves. AMMs solve the “long-tail liquidity” problem central order books cannot, at the cost of impermanent loss risk for LPs.
AMM
Automated Market Maker — a smart contract that prices and executes trades using a mathematical formula rather than an order book. Uniswap, Curve, and Balancer are the canonical examples. AMMs let anyone provide liquidity (LP) by depositing two tokens into a pool; the pool prices trades based on its reserves. AMMs solve the "long-tail liquidity" problem central order books cannot, at the cost of impermanent loss risk for LPs.
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