AMMs are the clearest example of DeFi replacing an institutional function with a mechanism. Instead of a broker, dealer, or order book specialist, the market uses a pricing rule, pooled inventory, fees, arbitrage, and LP capital.
That makes the system legible, but not simple. The tradeoffs move into impermanent loss, toxic flow, oracle dependence, fee tiers, concentrated liquidity, governance, and the routing layer.
Questions
- What pricing rule is the pool using, and what behavior does it reward?
- Who is carrying inventory risk when the market moves?
- Are LP fees high enough to compensate for adverse selection and volatility?
- Does the AMM improve access, price discovery, settlement, or only liquidity optics?
- Where does external price information enter the system?
Public Notes To Build From
Editorial Direction
This map should compare AMMs as market designs, not as isolated equations. The best public version would include one simple constant-product walkthrough, one concentrated-liquidity example, and one explanation of why tokenized real-world assets need different liquidity assumptions than volatile crypto pairs.