A smart contract that holds token reserves and enables trading without an order book. Prices are determined algorithmically based on the ratio of tokens in the pool. Uniswap, Curve, and Balancer are examples of AMM protocols.
AMM
Automated Market Maker (AMM)
Related terms in AMM
Constant Product Formula
The pricing invariant x * y = k, where x and y are token reserves and k is a constant. When one token is bough...
Liquidity Pool
A smart contract holding paired token reserves that enables trading. Liquidity providers deposit equal value o...
Liquidity Provider (LP)
A user who deposits tokens into a liquidity pool to facilitate trading, earning a share of trading fees in ret...
LP Token
A token minted to liquidity providers representing their share of a pool. LP tokens can be burned to withdraw ...