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Market maker
A market maker is a firm or trader that stands ready to both buy and sell an asset at publicly quoted prices, keeping an order book stocked. It earns mainly from the gap between the price it pays and the price it charges, the bid-ask spread.
What it means for you. When market makers are active you can usually trade quickly near the last price; when they pull back, as can happen in a sharp fall, spreads widen and your order can fill far from the quote. Before a large trade, look at the spread and the depth of the order book, not only the last price.
Sources: CFTC Glossary, Investor.gov glossary: Market Makers, Zhou, Qin, Ferreira Torres, Le and Gervais: High-Frequency Trading on Decentralized On-Chain Exchanges (arXiv) · checked 4 October 2026
Automated market maker
An automated market maker (AMM) is a smart contract that sets prices by formula instead of matching buyers with sellers. Traders swap against a pool of two tokens, and the price moves with the ratio of the tokens left in the pool.
What it means for you. Because the price is set by the pool's balances, a large trade against a small pool gets a noticeably worse rate than the quoted price. Check the price impact shown before you confirm a swap, and compare it with the size of your trade.
Sources: Uniswap docs: How Uniswap works, BIS Quarterly Review: DeFi risks and the decentralisation illusion, Uniswap docs: Understanding returns (v2) · checked 4 October 2026