AMMs (Automated Market Makers) are a type of decentralized exchange (DEX) protocol that relies on a mathematical formula to price assets. Instead of using an order book like traditional exchanges, AMMs use liquidity pools, which are collections of tokens locked in a smart contract. Traders interact with these pools to buy or sell assets, and the price is adjusted automatically based on the ratio of tokens in the pool. AMMs are commonly used in decentralized finance (DeFi) for providing liquidity, trading tokens, and enabling permissionless trading.
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