Super interesting technical discussions on both sides of the AMM debate tonight(@SBF_Alameda and @KyleSamani vs @danrobinson). There are also plenty of practical reasons for Uniswap's strong PMF, though. Here's the bottom line for me, as an active Uniswap LP:
For starters, where am I going to get my own personal on-chain algo trading firm with a single transaction? I don't have time or resources to build a bespoke AMM strategy.
I also just don't really care about any of the inefficiencies. I have no other options, and I'm pretty confident that I'm going to make money off the trading fees blindly fading some of these pairs both ways.
I felt this way even before UNI rewards came along (and this has been empirically true for many top pairs, in particular ETH/DAI). I LP because I have strong conviction that I'm going to make money. UNI rewards just sweeten the pot.
It's also comforting knowing that the Uniswap AMM acts as a Schelling point for all LPs. We're all in the same strategy, we all jointly don't care that we're inefficient. So for me the question is, if we are still making money, and retail is getting better quotes...
...(due to LP inefficiency),then who is really losing here? IMO it's the HFT algos / CLOBs. Intuitively it feels as if the retail gain comes at the expense of high-speed algos that can no longer take order flow from limit order books.
Who is pulling quotes when retail needs to hit the bid in a crisis? Not Uniswap LPs. We're asleep or not paying attention. LPs are less cutthroat than HFT, and so it attracts a lot of retail order flow (retail always has a bid to hit!), and so it cuts into algo fees.
Anyways, it feels like HFT is upset that Uniswap LPs are leaving so much money on the table, and in the process hurting the market for HFT (hence why Uniswap volume is comparable to Coinbase). Probably some mistakes in this thread but I think the inefficiences are overblown.

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More from @cyounessi1

16 Oct
1) I know basically nothing useful about market microstructure, but I have one theory for why HFT could hate AMM long-term. Requires a bit of an unnecessary and boring backstory in my old career.
2) I used to trade Treasuries, and Tsy futures. And trading the "basis" for a particular maturity was a very popular trade. Similar to how BTC on Bitmex tracks BTC on Coinbase pretty closely due to arbitrage, so too would, say, the 7yr bond track the futures contract for that...
3) ...maturity (CME product known as the ZN). As a basis trader, the 7yr/ZN was WILDLY popular and profitable. The single most levered up trade in the treasury market due to the liquidity and volume of the ZN. For whatever reason, this trade was my entire firm's bread and...
Read 11 tweets
28 Feb
THREAD: DeFi is at risk due to ProgPOW. If you care about collateral-based systems such as Maker / Dai, Compound, dYdX, and more, please consider taking a stance on ProgPOW. My number one priority is to prevent a contentious split, not to approve / reject ProgPOW (PP). 1/10
Setup: If PP is pushed through, and there is a contentious split such that the non-PP chain carries sufficient economic weight **even temporarily**, then an enormous amount of collateral will instantly be liquidated. 2/10
For example, if the marketcap split of $ETH is 60/40, (which we saw in the case of ETH/ETC, and BTC/BCH), then a large number of Vaults and other positions will be liquidated since the average Maker collateralization ratio is currently ~300% and the threshold is 150%. 3/10
Read 10 tweets
19 Feb 19
A thread on social media platforms regarding the @5chdn drama. I mainly want to highlight that various social media platforms have vastly different characteristics, and that most people aren't aware of this. 1/10
Many crypto reddits used to be small, with high signal. The communities were awesome. r/ethereum, r/ethtrader were markedly different. I imagine r/bitcoin was the same once upon a time. As these communities grew, the quality of discourse objectively declined. 2/10
Many prominent members of the community slowly left reddit and joined other platforms such as discord and Telegram. By far the most dominant crypto platform became Twitter. There's a very simple explanation for this: social scalability 3/10
Read 11 tweets
20 Dec 18
A (very bad) history of key events for smart contracts on Ethereum and why they're exciting:
1. Create a digital token (ERC-20)
2. Create an atomic swap contract to trustlessly exchange these ERC-20 tokens
2.5 Realize that all the tokens we've created so far are worthless
3. Create a token that's actually worth something, and test out your new swapper contracts
4. Fuck up and have your application drained of 12 million Eth.
4.5 Fork Ethereum
5. Create better swappers and concatenate them into an order book to create a decentralized exchange.
6. Realize that all digital tokens are still pretty worthless.
7. Finally, create first valuable ERC-20 token by using smart contracts to lock up collateral
Read 4 tweets
28 Aug 18
Seems like this tweet got a lot of love from anti-alt traders. I think some clarifications are in order.
Liquidity is just **one** aspect of investing. A crucial, often overlooked aspect, for sure. But fundamentals still matter. And finding solid innovations in the crypto space can be hugely profitable and worth it despite less liquidity. Nascent coins are on a different time scale.
In particular, liquidity crunches hit hardest for massively premined, manipulated, or otherwise completely hot-air coins. I don't want to re-name names, but there are obviously common ones that come to mind. In any case, in the end technology and innovation reign supreme
Read 4 tweets
10 Jul 18
0/ 61 markets and $16,000 of open interest so far within 12 hours of Augur's launch. In case you're wondering "what's the big deal," let's go over some of the markets that have been created so far.
1/ The most popular market was "Will France Defeat Belgium in the 2018 FIFA World Cup Semifinals?" The odds updated as goals were scored, and trustless sports betting will likely be a killer feature.
2/ Obviously, politics is a huge area of interest. "Will Donald J. Trump be elected AND inaugurated as President of the United States for the 2021-2025 presidential term?" will also likely be a huge market.
Read 11 tweets

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