Automated Market Makers (AMM) Examples

The AMM model is the default for decentralised exchanges but given the composability of DEFI different applications have emerged.

Uniswap

Uniswap uses AMMs to incentivise liquidity provision of pairs of Ethereum-based tokens (generally in a 50/50 ratio) which enable other users to swap those tokens for a fee without an intermediary, custody of funds or the need for KYC. 

Uniswap has traded over $1 trillion in volume and executed close to 100million trades. It has its own governance token that is paid to LPs (liquidity providers) in addition to fees from transactions and gives them a say in the future of the platform. 

Version 1 of Uniswap was launched in November 2018 and quickly became the template for Automated Market Making within crypto with copycat Decentralised Exchanges like Sushiswap adding more features or replicating the model for different blockchains, such as PancakeSwap on the Binance Smart Chain.

Curve Finance

Curve Finance applies the AMM model to Ethereum-based tokens but specifically to low-risk Stablecoin pairs or pairs of coins with equal or similar value. 50% of the fees generated from swaps go to the Liquidity Providers while the other half goes to holders of the underlying governance token CRV with rewards increasing depending on how long CRV is locked for.

1Inch

Ethereum’s use of standards enables composability, the building of new applications on top of existing ones, in order to generate additional user value. This has enabled the creation of DEX aggregators like 1Inch that will automatically search across individual decentralised exchanges to find and execute the best price swap for you.

Balancer

Balancer adapted the Uniswap model for Liquidity Provision without the requirement to provide asset pairs in a 50/50 ratio. You deposit liquidity to Balancer and traders look to earn arbitrage in order to continually rebalance your portfolio. The traders gain and you earn fees from their transactions.

This turns the traditional asset management model on its head where the customer pays a financial service provider to maintain a specific portfolio balance.