What is Automated market maker (AMM)?
An exchange that prices trades with a formula and pooled liquidity instead of an order book.
An AMM holds two assets in a pool and prices swaps along a curve, most often a constant product. The price moves as the ratio of the pool changes.
That means price impact grows with trade size, and the pool — not an order book — is your counterparty.
Related terms
- Liquidity poolDeFi
Tokens locked in a contract that traders swap against, earning the pool's fee share.
- SlippageTrading
The difference between the price you expected and the price you got, from moving the book yourself.
- Impermanent lossDeFi
The gap between supplying liquidity and simply holding the two assets as prices diverge.