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SBF
@SBF_FTX
The thing this is missing: There's no promise that, if Bob is an LP in an AMM and markets move, Bob will be the one to get to trade against the AMM. Sometimes Alice gets their order in first, and then Bob loses. And more generally: Bob could do that trade without being an LP.
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Benjamin Dean Mahala
@BenDMahala
So I'm going to be ~contrarian~ here and argue that AMMs are (in theory) isomorphic to regular liquidity providing on an order book exchange (in normal language, that means they're the same if you look at them the right way) twitter.com/SBF_FTX/status…
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Benjamin Dean Mahala
@BenDMahala
Replying to
@SBF_FTX
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@SBF_Alameda
Sure, but even with an order book on a CEX, someone can snipe one of Bob's orders before he can update it if they are faster then he is. In practice, AMMs are mostly on-chain and have to deal with the mempool dark forest and high fees so updating/arbing is more expensive.
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SBF
@SBF_FTX
Replying to
@BenDMahala
If there are no net trading fees ya -- but "canceling" vai sending an order requires paying net fees if they exist on an AMM. Also the equivalent of an orderbook would be that you only add liquidity when the px is exactly where you want to provide, can't pre-place limit orders
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Benjamin Dean Mahala
@BenDMahala
Replying to
@SBF_FTX
and
@SBF_Alameda
Yeah, but if the LP and arber are the same entity, they're just paying net fees to themselves. Order books definitely give you finer control over where you want your orders to be. If that strategy is important then OBs have an advantage, I just don't think it's that huge of one.
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SBF
@SBF_FTX
Replying to
@BenDMahala
that's only if the protocol doesn't collect fees eventually they all will, and so taker > maker rebates, the diff goes to the token/etc.
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