Blockchain, Crypto and DeFi

Chapter 7The AMM Time Machine: Back to the Future of Finance

Preface

Welcome to the chapter where we dive headfirst into the psychedelic whirlpool of Automated Market Makers (AMMs). If you’ve ever wished to mingle in the same circles as the high priests of finance, like Goldman Sachs or Citadel, but found your invitation was lost in the mail, fret not. In the domain of AMMs, anyone with an internet connection and a dream can rub virtual elbows with these titans, all from the comfort of their own living room, wearing pajamas, no less.

Here, in this financial Narnia, you don’t need a fancy degree or a Wall Street desk to play the game. The AMM platforms have democratized the art of market making, turning every Tom, Dick, and Harry into the potential next big thing in finance. It’s like suddenly discovering you can sing as well as Freddie Mercury but in the world of liquidity provision. Who knew?

But, as with all great tales of adventure and power, there’s a dragon to be faced: the beast known as impermanent loss. It sounds like a condition you’d argue with your gym instructor over, doesn’t it? “Sorry, can’t do more squats today; I’m suffering from a severe case of impermanent loss.” Yet, in the DeFi saga, it’s the sneaky villain lurking in the shadows, ready to snatch away your profits when the prices of your pooled assets decide to throw a party and forget to invite you.

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