Automated Market Making (AMM) is a protocol that enables trading on decentralized exchanges without the need for traditional order books. Instead of buyers and sellers placing orders, AMMs use smart contracts to adjust prices based on supply and demand.In an AMM system, liquidity providers deposit pairs of tokens into a pool, and these pools are used to facilitate trades. The pricing of assets is determined by a mathematical formula, commonly the constant product formula (x * y = k), where x and y are the quantities of the two tokens in the pool, and k is a constant.This method allows anyone to trade assets directly with the liquidity pool, eliminating the need for a middleman. As a result, trades happen instantly and often with lower fees compared to centralized exchanges.However, liquidity providers earn rewards through trading fees, but they also face risks such as impermanent loss. Despite these risks, AMMs have gained popularity for their accessibility, transparency, and the opportunity they offer for users to earn passive income by providing liquidity.