1) Can you fix AMMs?
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Interesting points here! You've definitely got the experience to back this up- however, there are benefits to market making in an AMM, such as "impermanent gain" when A falls in respect to B, and it's totally passive.
Still, I'm excited to see new ideas. Just keep building!
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Under general random walk theory impermanent gain should be roughly as common as impermanent loss, no? To use your parlance, it's just a PC euphemism for, "making good trades."
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you lose no matter which way the price diverges— because the arb flow only makes good trades, which means the pool (LPs) make bad trades.
LP returns are proportional to:
1. External subsidy
2. Non-toxic flow
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Example, I’m HODLing RUNE. Join an LP, have to sell half my stack to join. Rune .78 / BNB $21, 20k total (50/50). Rune drops to .44, BNB up to $27. 17k after removal from LP vs 12k HODL. isn’t that imp gain? As a LP I only care about entry\exit price right?