Will AMM win? Let's talk about why automated market makers are more capable than traditional market makers

【BitPush】The founder of a leading DEX recently criticized those who are bearish on AMM on social media. His core point is quite interesting — in low-volatility trading pairs, AMM can provide stable returns for investors with low capital costs, directly suppressing the profit margins of professional market makers.

More importantly, the long-tail markets. For high-volatility small-cap tokens, AMM is almost the only scalable solution. Instead of spending money to hire professional market makers, project teams and early holders can act as liquidity providers(LP) themselves, which is more efficient and cost-effective.

Regarding popular tokens, he admits that order book mechanisms are currently performing well, but this is not the end. With the improvement of the v4 version’s Hook mechanism, the profitability of the new generation of liquidity pools will be greatly enhanced. In the long run, because of the inherent advantage in capital costs, plus the composability and collateral features of liquidity, AMM will eventually win in this race.

Behind this debate is actually a collision between traditional financial instruments and on-chain native mechanisms.