What is automated market maker (AMM)?

What Is Automated Market Maker (AMM)?

An automated market maker (AMM) is a type of DEX that uses liquidity pools and a formula (e.g. x*y=k) to set prices instead of an order book. You swap against the pool. Examples: Uniswap, PancakeSwap. AMMs can have slippage and impermanent loss for LPs. In India, swapping on an AMM is a taxable event; keep records of cost and value received.