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Definition: AMM


(Automated Market Maker) A protocol for trading one crypto for another on a decentralized exchange (DeX). Unlike the traditional order book model used in stock exchanges, whereby bidders are matched up with sellers, the automated market maker (AMM) is an algorithm in a software-based smart contract that determines the price of the trade. See smart contract.

Liquidity Pools and Protocols
AMMs use liquidity pools, which are deposits of crypto tokens that provide the liquidity for making the trade (see crypto liquidity pool and crypto liquidity protocol). See decentralized exchange and yield farming.