AMM (Automated Market Maker) Explained

AMM. What Is it?

Introduction of Automated Market Maker

Algorithms of automated market maker

  • X is the number of one token in a currency pair;
  • Y is the quantity of the other.
  • K is a fixed constant that always remains the same.

Automated Market Maker Variations

  • Uniswap has become the most common model. It allows users to create a liquidity pool with any pair of ERC-20 standard coins with a 50/50 ratio.
  • Curve is considered the AMM with the lowest bids. It is specifically used for assets such as stablecoins.
  • Balancer is another very common variation of AMM. It has broader functionality, allowing users to create dynamic pools of liquidity for up to eight different assets in any ratio.

How do smart contracts automate trading on AMMs?

FAQ

What is AMM Crypto?

Why are AMMs becoming popular?

What are the risks and limitations of AMMs?

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