AMM is a new development in NFT marketplaces.
Until now, NFT marketplaces have relied on traders. Marketplaces act as the middlemen between an NFT buyer and seller.
Traditional NFT marketplaces rely on trader one (seller) listing their NFT for sale at a specified price. Trader two (buyer) decides to purchase the NFT from trader one.
NFT marketplaces are the middleman. Their job is to provide a seamless service between the buyer and seller. The marketplace handles the payment, collects the royalties (if applicable), and receives a fee for providing this service. It then transfers the ownership of the NFT to the buyer’s account.
The Problem With Traditional NFT Marketplaces
The main problem is marketplaces are dependent upon finding a buyer that is willing to purchase the NFT for the sale price. If you list an NFT for sale but can not find a buyer, you will be stuck with your NFT or have to reduce the sale price.
What Does AMM mean?
AMM stands for Automated Market Maker.
AMM is the technology that powers a decentralised exchange (DEX).
AMM enables assets to be traded by using liquidity pools as counterparties.
A liquidity pool is a smart contract that usually has two trading pairs.
Users can interact with the liquidity pool by swapping one asset (NFT) for another.
You can also provide liquidity (LP).
NFT liquidity providers must supply both the NFT and the token, for example, Ethereum.
Why Do People Provide Liquidity To A Pool?
When you supply the liquidity (NFT & token) to a pool, you receive the trading fees.
What Do NFT AMM Marketplaces Look Like?
For a user, the NFT marketplace will look and function the same as non-AMM Marketplaces. You can buy and sell NFTs.
Why Are AMM NFT Marketplaces Becoming Popular?
For large NFT investors, an AMM allows them to buy NFTs and then add them to the liquidity pool.
When an NFT collector owns many NFTs in a collection, they can set the floor price.
The NFT marketplace maintains the basic features of its platform, while giving control to the NFT owners.
NFT owners set the prices and trading conditions and earn trading fees.
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