Tag: liquidity pools

The decentralized finance (DeFi) landscape boasts a range of decentralized applications (dApps), automated market makers (AMMs), and decentralized exchanges (DEXs). Many DeFi protocols rely on the automated market maker model, which is now an essential tool for many crypto traders. Instead of the traditional order book model used by centralized exchanges (CEXs), an AMM uses liquidity pools, liquidity providers, and smart contracts. Also, AMMs facilitate non-custodial token swaps and offer users the chance to earn trading fees by becoming a liquidity provider (LP). However, this does come with risks, such as impermanent loss. However, there are now several blockchains that host a variety of different automated market maker platforms. But, what are automated market makers (AMMs)?