AMM stands for Automated Market Maker. Both parties in the transaction are interacting with the on chain liquidity asset pool. Liquidity pools allow users to seamlessly switch between tokens on the chain in a completely decentralized and unmanaged manner. Liquidity providers earn passive income through transaction fees, which are based on their percentage contribution to the asset pool. There are several types of AMMs: constant sum market makers (CSMM), constant mean market makers (CMMM), and advanced mixed constant function market makers (CFMM).