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DeFi

What is an AMM (automated market maker)?

Direct answer

An AMM is the smart-contract mechanism most DEXs use instead of an order book. Liquidity providers deposit token pairs into pools, and a pricing formula (e.

Details

. Liquidity providers deposit token pairs into pools, and a pricing formula (e.g. x*y=k) sets prices algorithmically. Traders swap against the pool and pay a fee that rewards the liquidity providers.

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