Uniswap’s Hayden Adams Rejects Claims That AMMs Are Unsustainable

Adams says automated market makers quietly win when currency is cheap and volatility is low, such as stablecoin pools.

Uniswap founder Hayden Adams has dismissed claims that automated market makers (AMMs) cannot survive, responding to X’s January 6 criticism that liquidity providers (LPs) are structurally underpaid.

The exchange has reopened the long-running DeFi debate about whether AMMs can compete with professional market makers, just as Uniswap is gearing up for a major upgrade aimed at raising returns to LPs.

Adams Defends AMMs as Critics of Economic Question Pay

The discussion began after trader GEE-yohm “LAMB-bear” Lambert wrote that AMMs are “unsustainable” because fees are tied to perceived volatility, while fund providers sell volatility that should be worth the implied volatility. In their view, that gap leaves LPs exposed during large price movements, with months of gains wiped out in days.

Adams responded with a detailed rebuttal, arguing that AMMs are already outperforming alternatives in several market segments. With low-volatility pairs like stablecoins, he said AMMs offer consistent yields to participants with cheap capital, allowing them to outbid professional firms.

For long-tail, high-volatility tokens, Adams added, AMMs are often the only structure that balances, with projects and early backers providing liquidity in bootstrap markets rather than chasing delta-neutral profits.

The fiercest competition, according to the Uniswap exec, lies in the main volatile tokens like ETH pairs. While critics often point to “markouts” to counter LPs that have lost money, Adams countered that AMMs have grown steadily over the years, with order books reaching maturity. He said the upcoming Uniswap v4 hooks will allow custom logic at the pool level, opening the door to pools holding a larger number of LPs.

“AMMs are just getting started,” he wrote, adding that the low cost of capital and logistics make them promising.

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Lambert later softened his stance, responding to Adams that he remains “AMM maxi” but sees structural inefficiencies in current designs. He said that permanent losses and gamma risk are manageable if payments increase, suggesting solutions ranging from v4 hooks to released models or tools like Panoptic that allow traders to hedge LP exposure.

Extensive debate on AMM Design and Incentives

Recent months have shown both the importance and vulnerability of AMMs. In November 2025, Balancer, a major AMM, was hacked for $120 million due to a bug in its code, a powerful reminder of the technical dangers inherent in these complex systems.

Meanwhile, Uniswap itself saw a positive market reaction that same month when Adams proposed to open a “switch” to share protocol fees with UNI token holders, sending the token’s price up 35%.

In addition, projects throughout the ecosystem are iterating on the AMM formula, with new entrants such as Pi Network releasing updated DEX features and AMM features focused on improving financial organization and user security.

The consensus from this debate is not that AMMs are doomed, but that their current cost structures need to be reinvented. As the development of Uniswap v4 continues, its promised “hooks” will be considered as a possible answer to the important question of LP’s long-term profitability and the continued life of the investment division.