# Learn about AMMs

* **What is an AMM?**\
  An Automated Market Maker (AMM) is a decentralized exchange mechanism where users trade against liquidity pools instead of traditional order books. AMMs maintain a balance between the tokens in a pool using mathematical formulas (x \* y = k) to enable swaps
* **What is Idle Capital?**\
  Idle capital refers to unused liquidity sitting in pools that isn't actively utilized in trades. For example, in a SOL-USDC pool during an uptrend, most trades may involve swapping USDC for SOL, leaving a large portion of USDC untouched.
* **Liquidity Provider (LP)** Users who deposit tokens into AMM pools to enable trading and earn fees.
* **Dynamic Fees** A mechanism where fees is adjusted based on pool activity and volatility, benefiting LPs during market volatility.
* **Capital Efficiency** Maximizing the utility and yield of deposited funds in a pool.
* **Total Value Locked (TVL)** The total amount of funds locked in an AMM’s liquidity pools, representing the scale of liquidity available for trading.
* **Slippage** The difference between the expected price of a trade and the actual price due to insufficient liquidity or high trade size.
* **Impermanent Loss (IL)** A temporary loss in value experienced by LPs when the price of tokens in a pool changes significantly compared to when they were deposited.
* **Liquidity Pool (LP)** A pool of two tokens that enables trading on an AMM by maintaining a balance according to a constant product formula.
* **External Protocols** Platforms outside of GooseFX, such as lending or borrowing protocols, where Fusion deploys idle capital to earn additional yield.
* **Dynamic Rebalancing** The process of adjusting deployed liquidity based on pool needs and market conditions to maintain optimal performance.
* **Permissionless Pools** Liquidity pools that can be created by anyone without approval, allowing a wide range of token pairs to trade on the AMM.