# 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. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.goosefx.io/goosefx-amm/gamma/learn-about-amms.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.