So how does it work? Well, imagine you have two assets: let’s say “Cool Coin” (CC) and “Rad Token” (RT). You want to exchange some CC for RT, but there aren’t any other people around who are willing to trade with you at the moment. No problem! Just head on over to our fancy Automated Market Maker platform and deposit your CC into a pool of assets that everyone can use.
Now let’s say someone else comes along looking to exchange some RT for CC, but they don’t have any RT to trade with you directly either. No worries! They just need to head on over to our fancy Automated Market Maker platform and deposit their RT into the same pool of assets that everyone can use.
So what happens next? Well, let’s say there are currently 10 CC in the pool and only 5 RT. If someone wants to exchange 2 CC for 1 RT (which is a fair price based on current market conditions), they just need to head over to our fancy Automated Market Maker platform and click “Exchange”. The system will automatically calculate how many RT are currently available in the pool, divide that by the number of CC in the pool (5/10 = 0.5), and then multiply that result by the amount of CC you want to exchange (2 x 0.5 = 1). So if someone wants to exchange 2 CC for RT, they will receive 1 RT in return!
But what happens if there are suddenly more people trying to buy or sell these assets than there is available liquidity? No problem! Our fancy Automated Market Maker platform uses a mathematical formula called an “AMM” (Automated Market Making) algorithm to ensure that the price of each asset remains stable and fair for everyone involved.
So basically, instead of having some rich dude or company control the price and supply of an asset through traditional methods like buying/selling shares on a stock market, we’re gonna let math do all the heavy lifting! And if you ever need to exchange your assets in a decentralized way without relying on any middlemen or intermediaries, just head over to our fancy Automated Market Maker platform and give it a try!