AMMs are a type of decentralized exchange (DEX) that use liquidity pools to enable users to trade digital assets such as SOL. Users can deposit their Solana ecosystem tokens into liquidity pools, which allows other people to swap without needing to rely on an institution for a middleman.
What makes AMMs built on Solana special?
Automated market makers have been around for years, with the most notable example being Uniswap on the Ethereum blockchain. Other examples include Polyswap, Droidex, and Sushiswap.
One reason AMMs work so much better on Solana is that the transaction fees are much lower when compared to other blockchains mentioned above. This is a vital part of DeFi’s long-term success.