TLDR
- Hayden Adams strongly denied claims that automated market makers are unsustainable.
- He explained that AMMs perform well in low-volatility and long-tail token markets.
- Trader Lambert argued that AMMs expose liquidity providers to high risk during price swings.
- Adams said Uniswap v4 will introduce custom hooks to help pools capture more value.
- Lambert later acknowledged the potential of AMMs but called for better fee structures.
Uniswap founder Hayden Adams has dismissed concerns over the long-term viability of automated market makers, or AMMs, following public criticism, reigniting a deep-rooted debate on liquidity provider profitability, protocol upgrades, and the structural mechanics of decentralized trading models.
Criticism from Trader Lambert Sparks Response
On January 6, trader GEE-yohm “LAMB-bear” Lambert argued AMMs cannot be sustainable due to how fees are calculated.
He explained AMMs rely on realized volatility, while LPs sell convexity, which should depend on implied volatility.
This difference, he claimed, causes LPs to face losses during price swings, erasing months of gains.
Hayden Adams responded directly on X, challenging the argument with multiple points based on AMM performance in different market types.
He stated, “AMMs already outperform alternatives in many segments,” stressing their efficiency with low-volatility pairs and scalable infrastructure.
He also emphasized that composability and lower capital costs give AMMs strategic advantages over centralized or professional models.
Uniswap Defends AMMs in Volatile Markets
Adams pointed out that stablecoin pools provide consistent yield to LPs with low capital requirements.
He argued this structure helps AMMs outcompete traditional market makers in such low-risk environments.
In contrast, long-tail assets need AMMs to bootstrap liquidity from early supporters and projects themselves.
Adams added that in these cases, AMMs are often the only mechanism available to scale market access.
For high-volatility majors like ETH, he admitted the competition is intense but stressed AMMs’ steady growth.
He noted critics often cite “markouts” to suggest LP losses, but order book maturity and consistent usage tell another story.
Focus Shifts to Uniswap v4 Hooks
Adams highlighted Uniswap v4 as key to solving current challenges faced by LPs under existing models.
He said its “hooks” will enable custom logic at the pool level, unlocking potential for better fee capture.
These features aim to address inefficiencies and risks such as impermanent loss and gamma exposure.
Lambert responded to Adams by softening his stance and suggesting improvements like fee increases and custom LP hedging tools.
He maintained, “I’m still an AMM maxi,” but expressed concerns about current designs and structural limitations.
Solutions such as Uniswap v4 and tools like Panoptic were floated as potential answers to fee model problems.
Security and Protocol Upgrades in Focus
In November 2025, Balancer, another AMM, suffered a $120 million exploit caused by a precision flaw in its smart contract code.
This incident exposed the underlying technical risks associated with AMM infrastructure and smart contract vulnerabilities.
At the same time, Uniswap received positive market attention after Adams proposed a fee switch to benefit UNI holders.
The proposal led to a 35% price increase for UNI, reflecting market optimism around the protocol’s revenue-sharing plan.
Meanwhile, newer platforms like Pi Network are introducing updated AMM features to improve liquidity and user protections.
The broader development effort continues as projects test new mechanics to improve LP outcomes and sustainability.
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