An automated market maker (AMM) is a type of decentralized trading system [→] that allows users to buy and sell cryptocurrencies directly from a liquidity pool, instead of matching buyers and sellers like traditional exchanges.
Prices are based on mathematical formulas and algorithms that adjust prices according to supply and demand. Exchanges using this approach typically rely on liquidity providers [→] to supply the tradable assets that keep the market liquid. In return, these providers earn a share of the transaction fees.
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