# Automated Market Makers 

By [Flend Research Group](https://paragraph.com/@flend-research-group) · 2023-11-01

---

Automated market makers (AMMs) are a type of decentralized exchange (DEX) that use algorithmic “money robots” to make it easy for individual traders to buy and sell crypto assets. Instead of trading directly with other people as with a traditional order book, users trade directly through the AMM.

Automated market makers incentivize users to become liquidity providers in exchange for a share of transaction fees and free tokens. It is the underlying protocol that powers all decentralized exchanges (DEXs), DEXs help users exchange cryptocurrencies by connecting users directly, without an intermediary. Simply put, automated market makers are autonomous trading mechanisms that eliminate the need for centralized exchanges and related market-making techniques.

Market makers are entities tasked with providing liquidity for a tradable asset on an exchange that may otherwise be illiquid. Market makers do this by buying and selling assets from their own accounts with the goal of making a profit, often from the spread—the gap between the highest buy offer and lowest sell offer. Their trading activity creates liquidity, lowering the price impact of larger trades.

While other types of decentralized exchange (DEX) designs exist, AMM-based DEXs have become extremely popular, providing deep liquidity for a wide range of digital tokens.

**Reference**

[https://chain.link/education-hub/what-is-an-automated-market-maker-amm#:\\~:text=Automated%20market%20makers%20(AMMs)%20are,buying%20and%20selling%20crypto%20assets](https://chain.link/education-hub/what-is-an-automated-market-maker-amm#:%5C~:text=Automated%20market%20makers%20\(AMMs\)%20are,buying%20and%20selling%20crypto%20assets).

[https://www.coindesk.com/learn/what-is-an-automated-market-maker/](https://www.coindesk.com/learn/what-is-an-automated-market-maker/)

You can join our communities below for more updates:

[**twitter.com**](https://twitter.com/FlendCryptoClub?t=inxX2B1U66ottpijD1Mj1w&s=09)

[https://twitter.com/FlendCryptoClub?t=inxX2B1U66ottpijD1Mj1w&s=09](https://twitter.com/FlendCryptoClub?t=inxX2B1U66ottpijD1Mj1w&s=09)

[**Flend Crypto Club**](https://t.me/FlendCryptoClub)

[https://t.me/FlendCryptoClub](https://t.me/FlendCryptoClub)

[**Flend Discussion Room ✨**](https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx)

[https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx](https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx)

[https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx](https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx)

---

*Originally published on [Flend Research Group](https://paragraph.com/@flend-research-group/automated-market-makers)*