AMM Exploit

Definition ∞ An AMM exploit involves a security breach or malicious attack against an Automated Market Maker protocol. This type of exploit typically targets vulnerabilities in the smart contract code, pricing algorithms, or economic design of a decentralized exchange’s liquidity pools. Attackers may manipulate asset prices, drain liquidity, or execute arbitrage strategies that unfairly profit from protocol weaknesses. Such incidents result in financial losses for liquidity providers and damage trust in the affected platform.
Context ∞ News concerning AMM exploits frequently reports on the methods used by attackers, the amount of funds lost, and the subsequent measures taken by project teams to address the vulnerability. These events underscore the inherent risks within decentralized finance and prompt discussions about smart contract auditing, security best practices, and insurance solutions. The frequency of these exploits influences regulatory scrutiny and investor confidence in DeFi applications.