What is AMM?

An Automated Market Maker (AMM) 🤖 is a smart contract on a blockchain that automates the process of buying and selling assets, by using a mathematical formula to set the price of assets in each pool. It plays an important role in Decentralized Exchanges (DEXs) by replacing the traditional role of market makers and managers found in centralized exchanges. AMMs rely on liquidity providers to deposit diversified tokens into pools, which the AMM then will create and manage pools of assets, effectively setting their prices and facilitating trades.