Ethereum Researchers Confront the AMM Design That Already Runs a Third of Solana Trading

A post on Ethereum Research by researchers writing as mike and maryam examines proprietary automated market makers, or PropAMMs, which they estimate already facilitate roughly one third of on-chain trading volume on Solana. Unlike the passive constant-product pools that defined the first generation of decentralized exchanges, these contracts embed active market-making strategies directly on-chain, using cheap and fast oracles to update quotes continuously as market conditions change, rather than following the fixed formula of earlier pools.

The significance is where competition has moved. Raw execution throughput and data availability are increasingly commoditized across chains and rollups. What is not commoditized is the design of the market itself: who captures the spread, how order flow is priced, and whether the party running the strategy can be displaced. PropAMMs concentrate that value in the operator of the strategy, which is efficient for traders but raises the question of how much of decentralized trading is actually decentralized.

For Ethereum, the post frames a choice. The chain can treat sophisticated on-chain market making as something to host and standardize, or it can watch that activity, and the fees and order flow it generates, accrue elsewhere. The reference to Solana is deliberate, because it is evidence that the mechanism-design contest is already being decided on throughput-optimized chains where these strategies run cheaply.

This is the shift worth tracking. The first generation of decentralized finance (DeFi) competed on the novelty of permissionless liquidity. The next competes on market microstructure, the same area where traditional finance concentrates its advantages, and the protocols that get incentive alignment right will capture value that faster block times alone no longer confer.