Glossary · DeFi
Automated market maker
Also: AMM, automated market makers
An automated market maker is a decentralized exchange design that prices trades from a formula applied to pooled reserves rather than from an order book, so a trade can always execute against the pool at some price.
Related terms
- Liquidity pool
- A liquidity pool is a smart contract holding reserves of two or more tokens that traders swap against at a price set by a formula, with the depositors earning a share of trading fees.
- Impermanent loss
- Impermanent loss is the shortfall a liquidity provider incurs relative to simply holding the two tokens, caused by the pool rebalancing toward the falling asset as relative prices move apart.
- Slippage
- Slippage is the difference between the price a trader expects and the price actually received, widening with trade size relative to available liquidity and with delay between quote and execution.
Stay informed
Verifiable crypto journalism, delivered to your inbox.
Weekday mornings. No hype. No financial advice. Just what happened and why it matters.
No spam. Unsubscribe anytime. Read our privacy policy.