DeFi & Yield

What is an AMM (automated market maker)?

An automated market maker, or AMM, is a type of decentralized exchange that lets users trade tokens against a pool of funds rather than matching them with another buyer or seller. Prices are set by a formula based on the ratio of assets in the pool, and liquidity providers deposit pairs of tokens to enable trading in exchange for a share of fees. For example, a pool holding ETH and a stablecoin prices swaps automatically as the balance shifts. AMMs make trading continuous, though providers can face impermanent loss when prices move. This sits within the broader DeFi landscape Qatobit studies through its methodology.