What is Automated Market Maker (AMM)

A market maker is a trading entity that is willing to purchase or sell assets to make a profit from the bid-ask spread. Market makers add buy and sell orders in an order book, creating liquidity. An automated market maker is a concept that emerged in the early nineties to partially solve the problems encountered with human market makers, specifically manipulation.

Automated market makers employ liquidity pools. Recently, AMMs were introduced in the blockchain world by decentralized exchanges such as Uniswap.