Automated market makers (AMMs) are decentralized finance (DeFi) protocols that allow traders to buy and sell cryptocurrencies without the need for traditional order books. Instead, AMMs use algorithms to determine asset prices based on the ratio of tokens held in a liquidity pool. Users can contribute liquidity to the pool by depositing their cryptocurrencies in exchange for a share of the pool's trading fees. AMMs typically charge a small fee for every trade, which is then distributed to liquidity providers based on their share of the pool. AMMs are becoming increasingly popular due to their ease of use, lower fees, and ability to facilitate trades 24/7 without the need for intermediaries.

Automated Market Makers (AMMs) are decentralized exchange protocols that facilitate trading of digital assets without a traditional order book. Instead, they use smart contracts to create liquidity pools where users can trade directly. AMMs rely on algorithms to price assets based on supply and demand within the pool.

For example, Uniswap, a popular AMM, uses a constant product formula (x * y = k) to maintain balance in its liquidity pools. Users can add liquidity to these pools and earn transaction fees in return.

AMMs enhance market efficiency by allowing continuous trading and reducing the need for intermediaries. They have become integral to decentralized finance (DeFi), enabling seamless and permissionless trading of cryptocurrencies and other digital assets.