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Glossary Term

AMM (Automated Market Maker)

Automated Market Makers (AMMs) are decentralized protocols that allow users to trade cryptocurrencies directly from their wallets by using liquidity pools instead of traditional order books, facilitating fast and permissionless exchange of tokens on Solana.

Beginner
DeFi
Crypto Terminology

AMM (Automated Market Maker): what is it?

Examples

  • 1

    Orca: User-friendly Solana AMM for swaps, yield farming, and liquidity pools.

  • 2

    Raydium: High-speed AMM and liquidity protocol layered with order book integration.

  • 3

    Lifinity: AMM with an innovative liquidity provision model on Solana.

Common Use Cases

Swapping tokens directly on-chain (e.g., exchanging SOL for USDC).
Providing liquidity to pools to earn passive income from trading fees.
Yield farming and staking LP tokens for additional rewards.
Launching new tokens via IDOs on Solana AMMs.

Pro Tips

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Always review pool depth and price impact before swapping or providing liquidity.

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Check the platform’s documentation for reward structures and fee breakdowns.

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Pay attention to “impermanent loss” when engaging as a liquidity provider.

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Utilize Solana’s explorers and aggregation tools to track pools and optimize strategies.

Frequently Asked Questions

Related Terms

Borrowing
DEX
Impermanent Loss
DAO (Decentralized Autonomous Organization)
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