What is an automated market maker(amm)?

What is an AMM?

AMM allows traders to buy and sell certain coins using an algorithm that dictates how expensive something should be, based on how much of it. Simply, it’s a supply & demand based on algorithm.

\[X \times Y = k\]

X and Y being the number of tokens in the liquidity pool, there product remains the same.

Suppose there are 50,000 token X and Y are present in a liquidity pool. If you sell 7,000 X token to the liquidity pool, then you get 6140 Y token, Because

\[(50,000+7,000) \times (50,000 - 6,140) \approx 50,000 \times 50,000\]