AMM (Automated Market Maker)
A system that lets people trade crypto directly from liquidity pools instead of using an order book.
An AMM, or Automated Market Maker, is a type of decentralized exchange (DEX) where trades happen through liquidity pools, not between individual buyers and sellers.
Instead of matching orders like on Binance or Coinbase, an AMM uses a mathematical formula (like x * y = k) to automatically set prices based on the ratio of tokens in the pool.
Anyone can become a liquidity provider by depositing two tokens (for example ETH and USDC) into a pool.
Traders then swap between those tokens, and liquidity providers earn fees from each trade.
AMMs made DeFi popular because they let people trade, earn, and provide liquidity — all without a central company in the middle.
💡 Lanzo Tip
Before adding funds to a liquidity pool, check for “impermanent loss” — your deposited tokens might be worth less later if prices move a lot.