Hidden Problems of Automated Market Makers
Dubai, UAE, 10th January 2024, Decentralized finance (DeFi) projects have been experimenting with various liquidity solutions as they strive to develop more streamlined and user-friendly alternatives to traditional order book systems used on centralized exchanges. Automated market makers (AMMs) have emerged as a popular solution. However, it does not mean that they work without their challenges, which users and liquidity providers alike must take into account. Let’s look at some of them.
Pool Imbalance
The sufficient amount of available liquidity in pools and the balance between liquidity pairs are vital for successful trading using AMMs. When liquidity is imbalanced, trading crypto assets at advantageous prices and within a reasonable time becomes impossible. If pools remain imbalanced...