AMM (Automated Market Maker)
An AMM is a decentralized exchange mechanism that uses liquidity pools and algorithms to price assets instead of traditional order books. Users trade against smart contracts, not other traders.
Understanding the Concept
AMMs revolutionized crypto trading. Before Uniswap, you needed buyers and sellers at matching prices. AMMs use the constant product formula (x*y=k) to always provide liquidity at some price. Anyone can become a liquidity provider by depositing token pairs and earn trading fees. The tradeoff is impermanent loss—if prices move significantly, LPs can end up with less value than just holding. AMMs power most DeFi trading: Uniswap, Curve, Balancer, PancakeSwap. Understanding how they work helps you trade smarter and evaluate LP opportunities.
Real-World Example
You want to swap 1 ETH for USDC on Uniswap. There's no counterparty—you trade against the ETH/USDC liquidity pool. The algorithm calculates the price based on pool ratios. Your trade moves the price slightly for the next trader.
How Strykr Helps
Strykr tracks AMM developments across the crypto ecosystem. Our AI provides real-time insights and alerts to help you navigate the market with confidence.
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