An Automated Market Maker (AMM) is a mechanism used in decentralized exchanges to enable trading without traditional order books. Instead of relying on buyers and sellers to set prices, AMMs use algorithms to price assets based on supply and demand.In an AMM, users provide liquidity by depositing pairs of tokens into a smart contract pool. In return, they earn a share of the trading fees generated by the platform. The price of a token is determined by a mathematical formula, ensuring that trades can occur seamlessly.AMMs reduce reliance on centralized entities, allowing users to trade directly from their wallets. They also enable continuous trading, as users can swap assets anytime without waiting for a counterparty.The most popular AMMs often use liquidity pools and incentivize users to maintain liquidity. This model has led to the growth of decentralized finance (DeFi) applications, offering various financial services without intermediaries. However, AMMs can be subject to risks like impermanent loss, affecting the returns for liquidity providers.