May 12, 2021

AMM: The Future of De-Fi

Cryptocurrency exchanges play a crucial role in the advancement of the blockchain industry. It is thanks to them that users sell, buy or exchange virtual assets with minimal headaches. By choosing a platform for work, crypto fans focus primarily on the one which has broader functionality and greater security. 

Each online platform has its specificities. Nevertheless, in general, they can be classified into decentralized and centralized. The latter is considered to be hardly in keeping with the spirit of blockchain. However, most of the crypto trades happen on such exchanges. But one should not forget that strong competitors are already breathing down their neck. We're going to drill down a little bit more now, into something called AMM.


Well, to start with, automated market makers have drawn increased interest in the De-Fi space. By its very nature,  AMM is a program or algorithm that sets a continuum of activities. It is much more effective than market makers on exchanges. It has found a prompt resonance in the blockchain industry, which relies on algorithms, programs, and smart contracts in the first place. However, "automatic exercise" of certain conditions was not enough. A so-called "liquidity pool" was necessary. This is a kind of storage where a large stock of cryptocurrencies is collected. It allows you to switch between assets instead of setting up trading pairs. And since these pools came into play, the interest in automated market makers has grown substantially.

Perhaps the most striking example of a project that uses AMM technology is the world-famous Uniswap. Anyone can participate in the creation and formation of a liquidity pool and receive a reward for this.

Core benefits of AMM:

  • new trading patterns;
  • slight price slippage;
  • no need to worry about order books when trading;
  • the delay of trade signals is milliseconds;
  • greater liquidity in the markets;
  • bad guys are less likely to manipulate prices;
  • the increase in net profits that attracted more institutional investors to the market;
  • lower price fluctuations;
  • a technical solution to the liquidity problem.

We are telling you, the future is AMM

Problems with liquidity might be common to all crypto exchanges. This perspective applies, in particular, to decentralized ones. If buying/selling a currency without sudden fluctuations in the price is impossible, then there are no traders. This is where AMM, the liquidity provider, comes to the rescue. In this case, we are talking about holders of virtual assets who want to make money on liquidity adding.

There is another strong argument in favor of AMM - security. Centralized exchanges are bad at resisting hacking and data leakage. Their competitors are designed to fill this gap, with the help of AMM.

Of course, the De-Fi sphere is just beginning to gain momentum. But despite this, AMM has already won an honorary place in this niche. The revolution will not happen overnight. But when decentralization comes tapping at the door, it's time to let it in.

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