What is AMM automated market making?

AMM, the full name is Automated Market Making, which means “automated market making”.

CoinEx’s AMM calculates the buying and selling prices according to the formula, and provides continuous quotations for the market. In terms of trading mechanism, CoinEx adopts the combination of AMM+order book, and the system will automatically convert the fund pool into an order book.

The AMM function launched by CoinEx enables ordinary users of centralized exchanges to become market makers by providing liquidity to the fund pool, and obtain the fee income returned by CoinEx.

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What algorithm does AMM use?

CoinEx adopts the “Constant Product Market Maker” in AMM. When users inject funds into the liquidity pool, they need to invest in two assets at the same time, and the quantity of the two assets will remain constant.

There are two AMM algorithms adopted by CoinEx:

Infinite Constant Product Market Maker
Based on the “infinite constant product market maker model”, its characteristic is that it can provide liquidity for the market no matter how high or low the price is, and it is mainly used in the non-stable currency market, such as CET/ USDT.
Finite Constant Product Market Maker
Based on the “finite constant product market maker model”, it is characterized by improved capital utilization and can provide liquidity for the market in a specific price range. It is mainly used in the stable currency market, such as USDC/USDT.

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What is a liquidity pool?

The liquidity pool holds the market-making funds in the AMM market. According to the ” constant product market maker model “, when users trade, the quantity of the two assets in the fund pool will maintain a constant product.

Users can obtain the fee income returned by CoinEx by providing liquidity, and the fee income obtained will be injected into the fund pool, and all the income can be obtained at one time when withdrawing liquidity.

Each trading pair in the AMM market has a liquidity pool, which holds the balance of the two assets and executes the deposit, withdrawal and trading rules of the two assets.

This rule is the “Constant Product Market Maker”, that is, when one of the assets is deposited (sold), the other asset must withdraw a certain percentage of the amount to ensure that the product is constant; When an asset is used, another asset also needs to deposit a certain percentage of the amount.

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What is the AMM marketplace?

The market that CoinEx supports the automatic market making function is the AMM market. The AMM market transaction fee rate is different from the general market, using an independent rate system. VIP does not enjoy rate discounts, and does not support the use of CET to deduct transaction fees.

User Types Rate in Non-stablecoin AMM Markets Rate in Stablecoin AMM Markets
Normal Accounts 0.30% 0.10%
Market Maker Accounts 0.15% 0.05%

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AMM Automatic Market Making Features

1. Automatic market making, earning income

After the user provides liquidity, the funds will be deposited into the fund pool for automatic market making, and 50% of the transaction fees earned in the market will be distributed to all liquidity providers according to the proportion of the fund pool.

2. Daily income, accumulative withdrawal

The fee income earned in the market-making account is calculated once a day, and today’s income will be credited to the account before 12:00 (UTC+8) of the next day, and the income will be automatically deposited into the market-making account, and the accumulated fee income can be obtained when withdrawing liquidity.

3. Free access, no fees

Assets between spot accounts and market-making accounts can be transferred in real time by increasing and withdrawing liquidity.
Each user in a single market can increase liquidity twice a day, and no fees will be charged during the operation.

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AMM market making income

The income of CoinEx AMM mainly comes from the fee income returned by CoinEx. All users who participate in AMM to provide liquidity for the fund pool can obtain 50% of the transaction fee income of the market according to the proportion of the fund pool, of which the proportion of all CET markets is 100% . The fee income earned by the market-making account is calculated once a day, and the account is credited the next day. The income is automatically deposited into the market-making account, and the accumulated fee income can be obtained when liquidity is withdrawn.

For example: on a certain day, the transaction fee generated in the LBC/USDT market is 100 USDT and 400 LBC, and Xiao Ming has a 10% share in the LBC/USDT fund pool, then Xiao Ming can obtain a fee income of 5 USDT and 20 LBC.

Calculated as follows:

(1) USDT: 100 * 50% * 10% = 5 USDT

(2) LBC: 400 * 50% * 10% = 20 LBC

Note: If it is in the CET/USDT market, the fee income ratio will be increased from 50% to 100%.

Currently, CoinEx has 350+ AMM markets. Click here to view all AMM market and liquidity market capitalization, 7-day turnover, annualized rate of return and other information.

CoinEx will launch more AMM trading pairs one after another, and the normal trading of users will not be affected during the online period.

The CET/USDT, CET/BTC, CET/BCH, and CET/USDC markets can enjoy 100% of the fee income returned by the platform, and the remaining market fee return ratio is 50%.

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