Automated Market Makers (AMMs)

Automated Market Makers (AMMs) are a specialized and advanced type of decentralized exchange that facilitates cryptocurrency trading through algorithmic mechanisms. AMMs do not rely on traditional order books to execute orders; instead, they leverage the liquidity from the liquidity pools. These pools have crypto coins supplied by traders, and trades are executed through liquidity pools using mathematical formulas.

Traders can swap different cryptocurrencies directly from the liquidity pools, and the price of assets is set by the ratio of assets deposited by traders in the pool. AMMs charge a small fee for swapping cryptocurrencies, which is provided to the liquidity providers as a reward or commission for their contribution to the pool.