Automatic market making refers to a system that allows users to trade assets without relying on traditional order books or centralized exchanges. Instead of matching buy and sell orders from users, it uses algorithms to set prices based on the supply and demand for various tokens.These systems operate through liquidity pools, which are collections of funds locked in smart contracts. Users can add their assets to these pools to earn rewards in the form of transaction fees. The prices of assets in the pool are determined by a mathematical formula, typically using a constant product formula like the one seen in decentralized exchanges.This approach helps maintain liquidity, making it easier for traders to exchange assets quickly. It democratizes market access, allowing anyone to participate in trading without needing a centralized authority. Automatic market making has become a foundational element of various decentralized finance platforms, enabling innovative financial services and trading strategies.