What is an automated market maker?

Unlike traditional exchanges, a DEX uses an automated market maker ( AMM) to enable a fluid trading system that borders on autonomy, liquidity and automation. Continue reading to understand the concept of an automated market maker and how it powers decentralized exchanges. Market Making: What Is It?

What is market making?

As its name implies, market making connotes the process involved in defining the prices of assets and simultaneously providing liquidity to the market. In other words, a market maker does create liquidity for a financial asset.

How do crypto market makers work?

From the explanation above, it is clear that crypto market makers work around the clock to reduce price volatility by providing the appropriate level of liquidity. What if there was a way to democratize this process such that the average individual could function as a market maker? This is where automated market makers enter the fray.