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Prince

@0xPrince • 6,249 subscribers

now: @avon_xyz prev: @solflare

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AMMs were a solid start, but now we’re seeing a clear demand for CLOBs, especially for highly liquid assets. Why? --- CLOBs are significantly more capital efficient than AMMs. In this simulation, CLOBs required 80% less capital while providing: - Lower slippage across all trade sizes - Less leakage to arbitrageurs (aka market makers in CLOBs) - Improved price discovery compared to the xy=k curve used in AMMs So why did we start with AMMs? --- Ethereum L1 isn't a high-throughput chain. Early DeFi primitives were designed with Ethereum’s throughput constraints, which made running an on-chain order book impractical. What’s changed? --- We now have better infrastructure. High-throughput chains could facilitate more frequent quote updates, resulting in tighter spreads and allowing CLOBs to achieve even more capital efficiency. Thanks to enzo for the inputs.

AMMs were a solid start, but now we’re seeing a clear demand for CLOBs, especially for highly liquid assets. Why? --- CLOBs are significantly more capital efficient than AMMs. In this simulation, CLOBs required 80% less capital while providing: - Lower slippage across all trade sizes - Less leakage to arbitrageurs (aka market makers in CLOBs) - Improved price discovery compared to the xy=k curve used in AMMs So why did we start with AMMs? --- Ethereum L1 isn't a high-throughput chain. Early DeFi primitives were designed with Ethereum’s throughput constraints, which made running an on-chain order book impractical. What’s changed? --- We now have better infrastructure. High-throughput chains could facilitate more frequent quote updates, resulting in tighter spreads and allowing CLOBs to achieve even more capital efficiency. Thanks to enzo for the inputs.

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