Adams argues that automated market makers are quietly successful the place capital is reasonable and volatility is low, like stablecoin swimming pools.
Uniswap founder Hayden Adams has pushed again on claims that automated market makers (AMMs) can’t final, responding on X on January 6 to criticism that liquidity suppliers (LPs) are structurally underpaid.
The trade has reopened a long-running DeFi debate about whether or not AMMs can compete with skilled market makers, simply as Uniswap is preparing for main upgrades geared toward elevating returns for LPs.
Adams Defends AMMs as Critics Query Charge Economics
The dialogue started after dealer GEE-yohm “LAMB-bear” Lambert wrote that AMMs “cannot 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 giant value strikes, with months of positive factors erased in days.
Adams replied with an in depth rebuttal, arguing that AMMs already outperform options in a number of market segments. For low-volatility pairs akin to stablecoins, he stated AMMs provide regular yield to individuals 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 slightly than simply chasing delta-neutral income.
The fiercest competitors, in accordance with the Uniswap exec, lies in high-volatility main tokens like ETH pairs. Whereas critics usually level to “markouts” to argue that 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 degree, 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.
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Lambert later softened his stance, replying to Adams that he stays “an AMM maxi” however sees structural inefficiencies in present designs. He argued that 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 allow 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 significant AMM, suffered a $120 million exploit attributable to 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 significant constructive market response in that very same month when Adams proposed turning on a “charge change” to share protocol income with UNI token holders, sending the token’s value 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 centered on enhancing liquidity group and consumer security.
The consensus rising from the talk isn’t that AMMs are doomed, however that their present charge constructions want innovation. As Uniswap v4 growth continues, its promised “hooks” shall be carefully watched as a possible reply to the important query of long-term LP profitability and the sustained well being of decentralized liquidity.
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