Bancorians, The latest twitter spaces recording "From AMMs to CLOBs: Improving

Question

Bancor Protocol

Cham AmaZix

Bancorians, The latest twitter spaces recording "From AMMs to CLOBs: Improving

DeFi Trading Infrastructure" is now available on YouTube:

https://www.youtube.com/watch?v=Z3Lyvr6BmSY

#bancor #blockchain #cryptocurrency #english

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08.12.2022

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Nate Hindman 🗿

55-Stephan | ALMANAK
Great Spaces! Adding my two cents on the topic. 🙂...

Well said!

0

09.12.2022

55-Stephan | ALMANAK · Accepted Answer

Great Spaces! Adding my two cents on the topic. 🙂 Every transaction on a financial market (either CEX or DEX) is an elementary act of price measurement. The reason for that is that there's no such thing as a "price" but rather a measure of it, through a transaction. The only moment where a price actually exists is when the transaction is executed, either at the bid or at the ask level. But this only lasts an infinitesimal instant. Said otherwise, markets have quantum nature. Therefore, price accuracy cannot be better than the spread between bid and ask. The problem of AMMs is that they ignore the existence of that discrepancy of views between buyers and sellers, and replace the spread by a "unique" price point (through the x*y=k curve) that so-called LPs would provide liquidity to. That unique price creates a disconnection from the actual intentions and strategies of users that cannot in fact be expressed as they should. Instead, it supposes an instantaneous “infinite” liquidity at all time (i.e. since there is no spread) that LPs are forced to post at that level. Impermanent loss is therefore a consequence of that structural misconception led by TVL. It can even be seen as the necessary expression of the quantum nature of markets that follows the existence of discrepancies of views. Instead of letting traders placing their bets at various price points and on different legs, thereby providing liquidity and making the market, AMMs generate IL and require “arbitrageurs” to correct this misconception. Hence, by the way, the common conflation of IL and arbitrage that Mark restates here. AMMs should go away from their current design and allow users to place their bets following their views and utility function, as in any other open free market. I think Carbon provides a great stepping stone in that direction.

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Bancorians, The latest twitter spaces recording "From AMMs to CLOBs: Improving

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