PropAMMs Reduce Solana Trading Costs While Public Pool Returns Decline

WHY IT MATTERS

In decentralized finance, automated market makers (AMMs) are like vending machines for crypto tokens — they let people swap one token for another without needing a traditional buyer and seller to match up. Regular people can stock these vending machines with their tokens (called providing liquidity) and earn a small fee every time someone makes a trade. PropAMMs are a newer, more advanced version of these vending machines that offer better prices to traders but are run by specialized operators rather than the general public. The tradeoff is that while traders pay less, the everyday people who put their tokens into the older public pools are now earning less because fewer trades are going through their pools. For anyone learning about DeFi, this illustrates an important concept: improvements that benefit one group of participants can sometimes come at the expense of another.