BASICS / 05 OF 08
DEX and AMM overview
The ledger’s decentralized exchange matches asset offers. Automated market makers add pools whose quoted exchange rates change with their asset balances.
Three things to know
- An order book lists offers; a pool provides formula-based liquidity.
- Asset identity and available liquidity matter as much as a displayed price.
- Fees, slippage and liquidity-provider losses make outcomes uncertain.
A practical example
A midpoint halfway between a bid and ask is a useful reference. It is not an offer to fill your entire trade at that number.
Technical detail
Cross-currency payments and offers can consume order-book liquidity, AMM liquidity or both. An AMM holds two assets and issues liquidity-provider tokens. Pool fees and changing relative prices affect the value of a provider’s share.
Common misunderstanding
Providing liquidity is not a guaranteed yield or a risk-free savings account.
Check the original sources
Editorial review: October 28, 2026. Source content and network rules can change.
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