Decentralized Exchange AMM

A Decentralized Exchange (DEX) with Automated Market Maker (AMM) is a protocol enabling permissionless token trading via liquidity pools. Instead of order books (buy/sell orders), traders trade against pools of liquidity. Formula (x y = k in Uniswap; different curve in Curve) determines price. Liquidity providers deposit capital, earn trading fees + farming rewards. Example: ETH/USDC pool on Uniswap. Provider deposits 10 ETH + $30k USDC. Trader wants to buy ETH. Pool formula: (10 - amount_out) (30k + amount_in) = 10 * 30k. Solves for amount_out. Trader gets ETH, pays USDC. LP earns 0.3% fee.