Imagine a lemonade stand 🍋
AMM, liquidity pool and liquidity explained simply:
The jar on the stand = the liquidity pool (the container)
The lemonade inside it = the liquidity (the supply available to trade)
The rule that automatically prices every cup = the AMM. No person needed. You put cash in, you get lemonade out. The more lemonade you take, the more expensive the next cup gets, because there’s less left.
The AMM fee = the cut the stand keeps every trade. 1% fee means for every $100 you hand over, the stand keeps $1 before giving you your lemonade.
That’s it.
Most blockchains set up the stand with its AMM on the sidewalk. XRPL built its AMM into the stand itself.
No Uniswap, no Raydium, no Pancakeswap, no Trader Joe.
Same stand, same lemonade, just one is way more solid 🐺
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