Adams argues automated market makers are quietly winning where capital is cheap and volatility is low, like stablecoin pools.
Uniswap founder Hayden Adams has pushed back on claims that automated market makers (AMMs) cannot last, responding on X on January 6 to criticism that liquidity providers (LPs) are structurally underpaid.
The exchange has reopened a long-running DeFi debate over whether AMMs can compete with professional market makers, just as Uniswap is getting ready for major upgrades aimed at lifting returns for LPs.
The discussion began after trader GEE-yohm “LAMB-bear” Lambert wrote that AMMs “can’t ever be sustainable” because fees are tied to realized volatility, while liquidity providers sell convexity that should be priced on implied volatility. In their view, that gap leaves LPs exposed during large price moves, with months of gains erased in days.
Adams replied with a detailed rebuttal, arguing that AMMs already outperform alternatives in several market segments. For low-volatility pairs such as stablecoins, he said AMMs offer steady yield to participants with cheaper capital, allowing them to outprice professional firms.
In long-tail, high-volatility tokens, Adams added, AMMs are often the only structure that scales, with projects and early supporters providing liquidity to bootstrap markets rather than just chasing delta-neutral profits.
The fiercest competition, according to the Uniswap exec, lies in high-volatility major tokens like ETH pairs. While critics often point to “markouts” to argue LPs lose money, Adams countered that AMMs have grown consistently for years, with order books reaching maturity. He said upcoming Uniswap v4 hooks will allow custom logic at the pool level, opening the door to pools that capture more value for LPs.
“AMMs are only just getting started,” he wrote, adding that lower capital costs and composability give them an edge.
Lambert later softened his stance, replying to Adams that he remains “an AMM maxi” but sees structural inefficiencies in current designs. He argued impermanent loss and gamma risk are manageable if fees rise, suggesting solutions ranging from v4 hooks to alternative issuance models or tools like Panoptic that let traders hedge LP exposure.
Recent months have shown both the value and vulnerability of AMMs. In November 2025, Balancer, a major AMM, suffered a $120 million exploit due to a precision flaw in its code, a stark reminder of the technical risks inherent in these complex systems.
Meanwhile, Uniswap itself saw a major positive market reaction in that same month when Adams proposed turning on a “fee switch” to share protocol revenue with UNI token holders, sending the token’s price up 35%.
Furthermore, projects across the ecosystem are iterating on the AMM formula, with even newer entrants like the Pi Network rolling out updated DEX and AMM features focused on improving liquidity organization and user safety.
The consensus emerging from the debate is not that AMMs are doomed, but that their current fee structures need innovation. As Uniswap v4 development continues, its promised “hooks” will be closely watched as a potential answer to the critical question of long-term LP profitability and the sustained health of decentralized liquidity.
