An automated market maker, otherwise known as an AMM, is a means of offering cryptocurrency trading without the need for an intermediary. AMMs combine Smart Contracts and incentives for liquidity provision to automate cryptocurrency trading and disrupt the traditional centralised exchange model, replacing it with the DEX.
A DEX is an abbreviation for Decentralised Exchange. It is a Peer-to-Peer online marketplace for buying and selling cryptocurrency that functions without a central authority and without taking custody of users’ funds.
Decentralised Exchanges instead rely on AMMs running on blockchains like Ethereum to set the prices of asset pairs and maintain sufficient liquidity.
DEX’s are a core component of DEFI – decentralised finance – generating 24hr trading volume in excess of $2bn, according to Coingecko.
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