AMM (Automated Market Maker)

An Automated Market Maker (AMM) is a decentralized exchange mechanism that prices trades algorithmically from the reserves in a liquidity pool rather than matching orders.

An AMM replaces the order book with a mathematical curve, such as the constant-product formula, that sets price from the ratio of tokens in a pool. Every swap shifts the reserves and therefore the price, which is why large trades incur slippage on shallow pools. AMMs power most DEX volume because they need no counterparty to be present. Reading AMM state on-chain, via decoded swap transactions and pool reserves in our data, lets a caller reconstruct the price a trade received.