Uniswap founder Hayden Adams has pushed again on claims that automated market makers (AMMs) can not final, responding on X on January 6 to criticism that liquidity suppliers (LPs) are structurally underpaid.
The alternate has reopened a long-running DeFi debate over whether or not AMMs can compete with skilled market makers, simply as Uniswap is preparing for main upgrades aimed toward lifting returns for LPs.
Adams Defends AMMs as Critics Query Payment Economics
The dialogue started after dealer GEE-yohm “LAMB-bear” Lambert wrote that AMMs “can’t ever be sustainable” as a result of charges are tied to realized volatility, whereas liquidity suppliers promote convexity that ought to be priced on implied volatility. Of their view, that hole leaves LPs uncovered throughout massive worth strikes, with months of positive aspects erased in days.
Adams replied with an in depth rebuttal, arguing that AMMs already outperform alternate options in a number of market segments. For low-volatility pairs equivalent to stablecoins, he stated AMMs provide regular yield to members with cheaper capital, permitting them to outprice skilled companies.
In long-tail, high-volatility tokens, Adams added, AMMs are sometimes the one construction that scales, with initiatives and early supporters offering liquidity to bootstrap markets reasonably than simply chasing delta-neutral income.
The fiercest competitors, in line with the Uniswap exec, lies in high-volatility main tokens like ETH pairs. Whereas critics typically level to “markouts” to argue LPs lose cash, Adams countered that AMMs have grown constantly for years, with order books reaching maturity. He stated upcoming Uniswap v4 hooks will enable customized logic on the pool stage, opening the door to swimming pools that seize extra worth for LPs.
“AMMs are solely simply getting began,” he wrote, including that decrease capital prices and composability give them an edge.
Lambert later softened his stance, replying to Adams that he stays “an AMM maxi” however sees structural inefficiencies in present designs. He argued impermanent loss and gamma threat are manageable if charges rise, suggesting options starting from v4 hooks to various issuance fashions or instruments like Panoptic that permit merchants hedge LP publicity.
A Wider Debate on AMM Design and Incentives
Latest months have proven each the worth and vulnerability of AMMs. In November 2025, Balancer, a serious AMM, suffered a $120 million exploit as a result of a precision flaw in its code, a stark reminder of the technical dangers inherent in these advanced programs.
In the meantime, Uniswap itself noticed a serious constructive market response in that very same month when Adams proposed turning on a “charge swap” to share protocol income with UNI token holders, sending the token’s worth up 35%.
Moreover, initiatives throughout the ecosystem are iterating on the AMM system, with even newer entrants just like the Pi Community rolling out up to date DEX and AMM options targeted on enhancing liquidity group and consumer security.
The consensus rising from the controversy is just not that AMMs are doomed, however that their present charge buildings want innovation. As Uniswap v4 growth continues, its promised “hooks” will likely be carefully watched as a possible reply to the vital query of long-term LP profitability and the sustained well being of decentralized liquidity.
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