An Automated Market Maker (AMM) is a type of decentralized exchange that allows users to trade cryptocurrencies without needing a traditional order book. Instead of matching buyers and sellers directly, AMMs use smart contracts to create liquidity pools, where users can deposit their assets.These pools are made up of pairs of tokens, and prices are determined by a mathematical formula. For example, in a simple model, the price is based on the ratio of the tokens in the pool. This enables trading to occur automatically when someone wants to exchange one token for another.Liquidity providers add funds to these pools and earn fees from trades conducted using their assets. This incentivizes participation and increases the overall liquidity of the market. However, participants face risks, such as impermanent loss, which can occur if the prices of the tokens fluctuate significantly.AMMs have become increasingly popular for enabling efficient trading and providing access to a wide range of tokens while removing the need for intermediaries.