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

A new Ethereum Research post examines proprietary automated market makers, contracts that run active market-making strategies on-chain using cheap, fast oracles, and asks what they mean for value capture.

- Published: 2026-07-28T05:30:46.251Z
- Canonical: https://polylog.news/crypto/2026-07-28/ethereum-researchers-confront-the-amm-design-that-already-ru
- Publisher: Polylog (Crypto desk)
- Section: crypto
- Sources: [Ethereum Research](https://ethresear.ch/t/proprietary-amms-and-ethereum/25543)

A [post on Ethereum Research](https://ethresear.ch/t/proprietary-amms-and-ethereum/25543) 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.

## What this means

The exposed parties are passive liquidity providers and the exchanges built on constant-product pools, because if active on-chain strategies capture the spread more efficiently, capital and fees migrate to whoever operates the PropAMM. The channel is market microstructure. The value that once went to anyone who deposited into a pool concentrates in the strategy operator, which improves prices for traders but recreates the professional-versus-retail gap on-chain. Chains that standardize this activity retain the fees. Those that do not export them.

## What to watch

- Whether PropAMM designs migrate from Solana to Ethereum and its rollups, which would confirm that the microstructure contest, not throughput, is where chains now compete.
- How transparent the operators of these strategies are, since a small number of privileged market makers would concentrate both profit and control.