AMM Explained: What Automated Market Makers Are and Why They Matter in Crypto

When you trade crypto on a platform like AMM, an Automated Market Maker is a system that lets traders swap tokens without needing a buyer or seller to match their order. Also known as automated market maker, it uses math and locked-up funds—called liquidity pools—to set prices automatically. Unlike old-school exchanges where people place buy and sell orders, AMMs run on smart contracts and keep trading open 24/7, even for obscure tokens.

This shift changed everything for DeFi. Before AMMs, getting exposure to new coins meant waiting for an exchange to list them. Now, anyone can create a trading pair with just a few clicks and some tokens. That’s why platforms like DEX, or decentralized exchanges, exploded in popularity. AMMs don’t need middlemen. They don’t require approval. They just work. And that’s exactly why so many of the guides here focus on them—whether it’s trading on PancakeSwap, earning fees from liquidity pools, or understanding why some tokens crash when liquidity dries up.

You’ll find real examples below: how AMMs power low-cost swaps on Linea, why some airdrops tie rewards to liquidity provision, and what happens when a token’s liquidity pool gets drained. These aren’t theory pieces. They’re post-mortems, breakdowns, and how-tos from people who’ve used these systems—sometimes successfully, sometimes the hard way. If you’ve ever wondered why your trade cost $20 in gas, or why a token you bought vanished overnight, the answers are in the posts below. No fluff. Just what AMMs actually do, how they break, and how to use them without getting burned.