What is Automated market maker (AMM)?
The pricing formula a DEX pool uses to quote a price from the amounts of each token it holds.
The classic AMM keeps the product of the two token balances constant (x × y = k). Buying one token removes it from the pool, making what remains more expensive. Newer designs concentrate liquidity in a price range or use different curves for assets that should trade near the same price, such as two stablecoins.
AMMs never refuse a trade, so price depends entirely on how deep the pool is. That is why liquidity matters so much on DEXes.
