An Autonomous Market Maker (AMM) is a type of decentralized exchange that facilitates trading without relying on traditional order books. Instead, it uses algorithms to set prices based on supply and demand, allowing users to trade assets directly against smart contracts.In an AMM, liquidity is provided by users who deposit pairs of tokens into liquidity pools. These pools are then used to enable trades. The price of the tokens adjusts automatically based on the number of tokens in the pool, ensuring that trades are executed at market rates.AMMs offer several advantages, including lower barriers to entry for traders and liquidity providers. They enable faster transaction times and greater transparency, as trades occur on the blockchain without intermediaries.However, users face risks like impermanent loss, where the value of deposited tokens can change due to price fluctuations. Despite these challenges, AMMs have gained popularity for their ability to provide decentralized trading solutions.