AMM (Automated Market Maker) Explained

When working with AMM, an on‑chain protocol that swaps tokens using shared liquidity pools instead of order books. Also known as Automated Market Maker, it powers most decentralized exchanges.

The AMM model has reshaped how traders think about liquidity.

In practice, a Decentralized Exchange, a platform where users trade directly from their wallets (DEX) relies on liquidity pools, funds deposited by liquidity providers that the AMM draws from to execute swaps . Those pools are managed by smart contracts, self‑executing code that enforces the pricing curve and distributes fees . Because the pricing is algorithmic, traders can experience slippage, but they also benefit from instantaneous settlement and no need for a counter‑party.

One interesting side effect is that the transparent pricing of AMMs creates opportunities for flash loans. Borrowers can pull large, uncollateralized amounts, trade across multiple AMMs, and repay in the same block, capturing the price differences. While this can boost liquidity and discover better market rates, it also exposes vulnerabilities that platforms must mitigate.

Why AMMs matter for DeFi

DeFi protocols use AMMs to power everything from yield farming to token launchpads. By removing the need for a central order‑matching engine, developers can launch a new market with a single contract deployment. This lowers barriers for innovators across Southeast Asia, where many projects aim to tap local liquidity without relying on legacy exchanges.

Below you’ll find a hand‑picked set of articles that dive deeper into AMM mechanics, flash‑loan strategies, DEX reviews, and real‑world case studies across the region. Whether you’re building a new pool, evaluating an existing platform, or just curious about the latest DeFi trends, the collection gives you practical insights you can act on right away.