Automated Market Maker (AMM): How Uniswap Works

At the core of Uniswap is an innovative mechanism known as the Automated Market Maker (AMM). By mid-2025, instead of matching buyers and sellers like centralized exchanges, AMM utilizes liquidity pools—smart contracts that hold reserves of two tokens. The price of a token is determined not by supply and demand, but by a mathematical formula x * y = k, where x and y are the quantities of the two tokens in the pool. Anyone who wants to trade interacts with this pool rather than with another trader. This ensures constant liquidity and eliminates the need for traditional market makers. #UNI $UNI