Course Content
What Is an Automated Market Maker (AMM)?
You could think of an automated market maker as a robot that’s always willing to quote you a price between two assets. Some use a simple formula like Uniswap, while Curve, Balancer and others use more complicated ones. Not only can you trade trustlessly using an AMM, but you can also become the house by providing liquidity to a liquidity pool. This allows essentially anyone to become a market maker on an exchange and earn fees for providing liquidity. AMMs have really carved out their niche in the DeFi space due to how simple and easy they are to use. Decentralizing market making this way is intrinsic to the vision of crypto.
What Is an Automated Market Maker (AMM)?
About Lesson
Decentralized Finance (DeFi) has seen an explosion of interest on Ethereum and other smart contract platforms like Binance Smart Chain. Yield farming has become a popular way of token distribution, tokenized BTC is growing on Ethereum, and flash loan volumes are booming.
Meanwhile, automated market maker protocols like Uniswap regularly see competitive volumes, high liquidity, and an increasing number of users.
But how do these exchanges work? Why is it so fast and easy to set up a market for the latest food coin? Can AMMs really compete with traditional order book exchanges? Let’s find out.