# Automated market maker

## Definition

An automated market maker, or AMM, is a smart-contract-based trading mechanism that prices assets using a formula and liquidity pools instead of relying only on matching buyers and sellers in an order book.

## What it means in practice

AMM prices move as trades change pool balances, and execution can be affected by pool depth and slippage.

## How this concept appears in Terenval Wallet

Terenval can act as the signing wallet for compatible AMM dApps; the AMM smart contract determines pricing and settlement.

**Important:** Large trades in shallow pools can experience substantial slippage even when the wallet itself works correctly.

**[Install Terenval Wallet](https://wallet.terenval.com/?lang=en)**

## Related terms

- [Decentralized exchange](https://wallet.terenval.com/glossary/decentralized-exchange/)
- [Liquidity pool](https://wallet.terenval.com/glossary/liquidity-pool/)
- [Slippage](https://wallet.terenval.com/glossary/slippage/)
- [Liquidity provider](https://wallet.terenval.com/glossary/liquidity-provider/)
- [DeFi](https://wallet.terenval.com/glossary/defi/)
- [smart contract](https://wallet.terenval.com/glossary/smart-contract/)

## Related Terenval Answers

- [How to Secure a Non-Custodial Crypto Wallet](https://wallet.terenval.com/answers/how-to-secure-non-custodial-crypto-wallet/)
- [How to Send Crypto Safely Between Wallets](https://wallet.terenval.com/answers/how-to-send-crypto-safely-between-wallets/)
- [Can One Crypto Wallet Manage Multiple Blockchains?](https://wallet.terenval.com/answers/can-one-crypto-wallet-manage-multiple-blockchains/)

## Sources

- https://ethereum.org/en/defi/
- https://docs.walletconnect.network/
- https://wallet.terenval.com/info/security/

Official page: https://wallet.terenval.com/glossary/automated-market-maker/