Uniswap’s Hayden Adams rejects claims that AMMs are unsustainable

Adams argues that automated market makers are quietly winning where capital is cheap and volatility is low, such as stablecoin pools.

Uniswap founder Hayden Adams has pushed back on claims that automated market makers (AMMs) can’t keep it going, responding to 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 gears up for major upgrades aimed at boosting returns for LPs.

Adams defends AMMs as critics of the economics of asking

The discussion started after trader GEE-yohm “LAMB-bear” Lambert wrote that AMMs “can never be sustainable” because fees are tied to realized volatility, while liquidity providers sell convexity that must be priced based on implied volatility. According to them, this gap leaves LPs exposed during major price moves, erasing months of gains in days.

Adams responded with a detailed rebuttal: argue that AMMs are already outperforming alternatives in several market segments. For low-volatility pairs such as stablecoins, he says AMMs offer stable returns to participants with cheaper capital, allowing them to outperform professional firms.

In high-volatility long-tail 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.

According to the Uniswap director, the fiercest competition lies in large tokens with high volatility, such as ETH pairs. While critics often point to “markouts” to argue that LPs are losing money, Adams countered that AMMs have been growing consistently for years, with order books maturing. He said the upcoming Uniswap v4 hooks will enable custom logic at the pool level, opening the door to pools that deliver more value to LPs.

“AMMs are just getting started,” he wrote, adding that lower capital costs and composability give them an edge.

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Lambert later softened his position, in which he replied to Adams that he remains “an AMM maxi” but sees structural inefficiencies in current designs. He argued that impermanent losses and gamma risk are manageable as fees rise, and suggested solutions ranging from v4 hooks to alternative issuance models or tools like Panoptic that allow traders to hedge LP exposure.

A broader debate on SMP design and incentives

The past few months have demonstrated both the value and vulnerability of AMMs. In November 2025, Balancer, a major AMM, suffered a $120 million exploit due to a precision error in its code, a stark reminder of the technical risks inherent in these complex systems.

Meanwhile, Uniswap itself saw a major positive market reaction that same month when Adams proposed enabling a “fee switch” to share protocol revenue with UNI token holders, driving the token’s price up by 35%.

Additionally, 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 aimed at improving liquidity organization and user security.

The consensus emerging from the debate is not that AMMs are doomed, but that their current fee structures need innovation. As development of Uniswap v4 continues, the promised “hooks” will be closely watched as a possible answer to the critical question of long-term LP profitability and the continued health of decentralized liquidity.