Overview

An Automated Market maker (AMM) is a protocol that runs on decentralized exchanges (DEX), that takes away the order book that exists on traditional exchanges, where liquidity is provided by buyer and seller orders, and replaces it with liquidity pools, a shared pot of tokens.

AMMs help new DEXs who would be faced with a small number of buyers and sellers trading on a regular basis – or low liquidity – early on in their existence.

An AMM works similarly to an order book exchange in that there are trading pairs – for example, ETHW/USDT. However, you don’t need to have a counterparty (another trader) on the other side to make a trade. Instead, you interact with a smart contract that “makes” the market for you.

Zergswap is the 1st open-source and audited AMM-based decentralized crypto trading protocol on EthereumPoW.