Automated Market Maker is a decentralized trading platform (DEX) protocol that prices assets through a mathematical formula. Asset pricing is done through a pricing algorithm, eliminating the use of order books commonly used in traditional trading platforms.

The pricing formula varies with different protocols. For example, Uniswap uses a formula of x * y= k, where x represents the number of one token in the liquidity pool and y represents the number of another token. In this formula, k is a fixed constant, indicating that the total amount of liquidity in the pool must remain constant. Other AMMs use other formulas depending on the specific target use case. However, regardless of the formula used, the pricing is done through an algorithm. If this is still confusing, don't worry, we will cover it in detail below.

The traditional market maker mechanism is usually used by companies with a large amount of resources and a complex strategy. With this mechanism, you can get premium prices and enjoy low bid/ask spreads on order book trading platforms such as Coinan. Automated Market Makers (AMMs), on the other hand, decentralize the process so that everyone can create markets in the blockchain. So, how exactly do they do it? Read on in this article to learn more.

Automated Market Maker is a decentralized trading platform (DEX) protocol that prices assets through a mathematical formula. Asset pricing is done through a pricing algorithm, eliminating the use of order books commonly used in traditional trading platforms.

The pricing formula varies with different protocols. For example, Uniswap uses a formula of x * y= k, where x represents the number of one token in the liquidity pool and y represents the number of another token. In this formula, k is a fixed constant, indicating that the total amount of liquidity in the pool must remain constant. Other AMMs use other formulas depending on the specific target use case. However, regardless of the formula used, the pricing is done through an algorithm. If this is still confusing, don't worry, we will cover it in detail below.

The traditional market maker mechanism is usually used by companies with a large amount of resources and a complex strategy. With this mechanism, you can get premium prices and enjoy low bid/ask spreads on order book trading platforms such as Coinan. Automated Market Makers (AMMs), on the other hand, decentralize the process so that everyone can create markets in the blockchain. So, how exactly do they do it? Read on in this article to learn more.