what_is_amm.md

What is an AMM?

AMM - automated market maker

Decentralized exchange that allows users to buy and sell tokens without
an order book.

How is the price determined?

Price is determined by an algorithm, usually a math equation.

Users and flow of tokens

- Traders
  - Deposit a token in exchange for another token
  - Token in (token that the trader sends to the AMM)
  - Token out (token that the trader receives from the AMM)

- Liquidity providers
  - Seller of both tokens
  - Deposit usually both tokens to the AMM
  - Earn swap fees
  - Withdraw tokens
    - Not necessarily the same amounts as deposits
    - Withdraw amounts are determined by the amount of tokens in the AMM