What is AMM (Automated Market Maker)?
An automated market maker is a smart contract that prices assets using a deterministic formula (commonly x*y=k) and pools of liquidity provided by users. AMMs power most DEX trading volume because they allow continuous, permissionless markets for any token pair.
Why AMM (Automated Market Maker) matters
Understanding AMM (Automated Market Maker) is part of building a solid mental model of how Bitcoin, blockchain and Web3 systems actually work. Concepts in the Ethereum category sit at the foundation of the broader stack — get them right and the rest is far easier.
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Related terms
- DEX (Decentralized Exchange) — A smart-contract-based trading protocol.
- Liquidity Pool — A smart contract holding pooled assets for trading.
- DeFi (Decentralized Finance) — Financial services built from smart contracts.
More ethereum terms
- Ethereum — A programmable blockchain that supports smart contracts.
- EVM (Ethereum Virtual Machine) — The execution environment for Ethereum smart contracts.
- Gas — The unit measuring computational cost on Ethereum.
- NFT (Non-Fungible Token) — A unique, non-interchangeable token on a blockchain.
- Smart Contract — Code on a blockchain that automatically enforces its rules.
- Solidity — The most popular programming language for Ethereum smart contracts.
- Web3 — An umbrella term for blockchain-based, user-owned internet applications.
- DAO (Decentralized Autonomous Organization) — An on-chain organization governed by token holders.
Keep exploring
Continue with the full blockchain glossary — 136 terms in total — or read the developer blog and FAQ for deeper context.