RT
@rj_aligned: Leaving a long answer here but this is a great opportunity to refresh the basics of propAMMs and how they can help new assets such as local currency stablecoins access affordable on chain liquidity.
The main difference between an AMM and a propAMM is how prices are set. In a traditional AMM like Uniswap, liquidity comes from multiple LPs, and prices are determined by a formula in the smart contract based on the liquidity available.
In a propAMM, a single market maker provides the liquidity and actively updates the prices at which it's willing to buy and sell. This gives the MM more control over pricing and inventory management, while keeping all that liquidity accessible onchain.
PropAMMs started on Solana, where they now process around $1B in daily volume, representing ~33% of spot DEX trading. On SOL/USDC, most propAMM trades offered better execution after fees than Binance and other major CEXs, even at their highest-volume trading tiers.
On Ethereum, we're now seeing around $100M in daily volume and over $4.3B traded in total, with more propAMMs and liquidity coming soon.
One reason this model works well is that MMs can constantly adjust their quotes to market conditions, reducing their exposure to stale prices. That allows them to quote tighter spreads without taking on as much risk.
You can see this in the screenshots. For a $10k ETH/USDC trade, most propAMMs are quoting tighter spreads than Binance. FermiSwap, which has some of the deepest liquidity, quotes 1.39 bps vs. 4.51 bps on Binance (VIP9) and 12.10 bps on Uniswap v3. On USDC/USDT, FermiSwap's ask is just 0.10 bps above the reference price for a $1k trade.
There's still a lack of depth on Ethereum for really big trades but small/medium size trades are already getting very good quotes, but we need more liquidity to offer the same pricing for larger trades.
We think propAMMs make a lot of sense for long-tail assets. A project can work directly with an MM to provide efficient onchain liquidity and customize its pricing logic without needing large amounts of passive LP capital. This is especially useful for stablecoins pegged to local currencies. A single propAMM can quote multiple currencies against USDC and against each other, reusing the same USDC inventory instead of fragmenting liquidity across separate pools for every pair.
Since May, we've been working with
@alignedlayer,
@class_lambda and
@titanbuilderxyz on the infrastructure for propAMMs on Ethereum. We've built two things:
- A router that provides a single interface to trade across different propAMMs, with additional features to prevent spoofing and support multileg trades.
- A propAMM factory that includes both the smart contracts and offchain infrastructure MMs need to launch and run their own propAMMs.
At
@alignedlayer, we're also running an experimental propAMM called ElZorro together with
@polfinance_, where we test new features with real trades and use what we learn to quickly iterate on the propAMM factory.
We're now exploring bringing this infrastructure to other EVM chains such as Base and Robinhood.
You can read more here:
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