What Is an Automated Market Maker (AMM)? | Binance Academy
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Automated market makers are smart contracts in DeFi that let anyone create a market by depositing cryptocurrency into a liquidity pool.
Key Takeaways An automated market maker (AMM) is a smart contract-powered protocol that continuously prices two or more digital assets using algorithmic formulas, enabling token trading without traditional order books. AMMs replace order-book matching with liquidity pools, where token prices adjust automatically as trades change the pool's token balances. Anyone can become a liquidity provider (LP) by depositing tokens into a pool and earning a proportional share of trading fees. LPs receive LP tokens representing their pool share, which can be redeemed when they withdraw. Introduction…
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