James Ding
Jan 19, 2026 22:40
Proprietary AMMs use predictive value feeds to rival centralized trade effectivity on-chain. Here is how they work and why they’re controversial.
Skilled market makers have discovered a technique to function on Solana (SOL) with near-Binance effectivity—and it is altering how DeFi liquidity truly works.
Proprietary Automated Market Makers, or PropAMMs, clear up an issue that is plagued decentralized exchanges since Uniswap launched in 2018: passive liquidity suppliers constantly lose cash to arbitrageurs. The repair includes pushing predictive value feeds on-chain and encoding subtle buying and selling logic into sensible contracts.
The Core Downside With Conventional AMMs
Market makers survive by always updating their quotes. When Bitcoin drops from $100,000 to $98,000, they cancel previous orders and put up new ones at present costs. Miss that replace, and knowledgeable merchants will choose you off—shopping for your stale $100,000 quote when the actual value is $98,000.
On Binance, putting and canceling orders prices nothing. On-chain, each transaction burns charges. Even Solana’s low cost gasoline provides up whenever you’re updating quotes lots of of instances per second.
Uniswap’s x*y=ok method eradicated order administration totally, however created a distinct downside: the AMM has no concept what the actual market value is. If Uniswap quotes Bitcoin at $100,000 whereas each different trade reveals $98,000, arbs drain the pool till costs converge. Liquidity suppliers eat the loss.
Uniswap v3’s concentrated liquidity helped capital effectivity however did not repair the elemental problem. LPs nonetheless get picked off except they manually rebalance—which brings again the transaction payment downside.
How PropAMMs Truly Work
PropAMMs flip the mannequin. As an alternative of ready for trades to maneuver costs, they:
Preserve predictive value fashions off-chainPush minimal value updates on-chain (usually simply 8 bytes)Let sensible contract logic calculate quotes in real-time
When a dealer hits a PropAMM, the contract checks present market value, volatility, counterparty id, current commerce historical past, and the way recent the final replace was. Then it quotes accordingly.
The effectivity achieve is substantial. Updating a single value variable prices a fraction of changing 10+ orders on an on-chain order ebook. PropAMMs can replace a number of instances per Solana slot whereas remaining worthwhile.
The Centralization Commerce-off
Here is the place it will get controversial. As business analysts famous in October 2025, PropAMMs “echo the identical constructions crypto as soon as sought to flee.”
Not like Uniswap swimming pools the place anybody can deposit, PropAMM liquidity comes primarily from the operators themselves. The sensible contracts are closed-source. Integration with aggregators like Jupiter requires permission. Customers cannot confirm they’re getting one of the best obtainable value.
There’s additionally a validator downside distinctive to Solana. Some block producers run their very own PropAMMs and should prioritize their very own value updates whereas delaying opponents’. Others extract MEV by together with updates as late as doable to maximise stale-price arbitrage.
The Anza crew is reportedly engaged on fixes (referenced as “MCP”), however for now, PropAMM efficiency varies relying on which validator is producing blocks.
What This Means for Merchants
PropAMMs at present deal with important quantity on main Solana pairs, notably via Jupiter routing. For liquid property, they usually present tighter spreads than conventional AMMs.
However they will not work for the whole lot. The transaction payment flooring means long-tail tokens with skinny quantity cannot be profitably market-made this manner. And the closed-source, permissioned nature means customers are trusting black packing containers operated by nameless groups.
The expertise works. Whether or not DeFi ought to embrace these trade-offs is a distinct query—one the Solana ecosystem is actively debating as PropAMMs seize extra market share from clear, permissionless options.
Picture supply: Shutterstock
