This article has been translated from English to Gen Z Slang.
Ayo, so an Automated Market Maker (AMM) is kind of like this dope protocol that vibes on decentralized exchanges (DEX). It basically ghosts the whole order book thing from OG exchanges, where peeps are waiting with buy and sell orders, and swaps it with liquidity pools—basically a communal stash of tokens. 💰
The squad using the AMM slides into the pool with their tokens and then magic happens – the price of an asset is calculated by some lit math formula. 🔢✨
AMMs totally save newbie DEXs from having like zero buyers and sellers trading regularly – aka low liquidity – when they’re just getting started. 🚀
As liquidity providers (our buyer and seller homies) fill up the pool with assets, the DEX’s liquidity starts popping off. 📈
These liquidity providers get hyped with fees for their pool contribs, while the DEX gets mad liquidity, making trades smooth like butter. 🍞
There's mad science behind how AMMs set up their pricing and liquidity formulas, and that's what makes one AMM tick different from the next. 🤔
Some hella popular AMMs in the DeFi game that are blowing up like crazy are Uniswap, Pancakeswap, Curve, and Balancer. 🌟