Hi Sooraj, love your threads, happy to see you here, sorry this post got kinda lost, I recommend if u wanna reach the Minswap Team, please reach out on our Discord I will answer with my limited knowledge, what I think about Constant Product Market Makers (CPMM), Central Limit Order Books (CLOBs), and Concentrated Liquidity Market Makers (CLMM).
Saying that “AMMs are inferior to Order book model Exchanges” makes a lot of sense, in theory, but am not sure if that applies for the practice. Especially, in an on-chain environment, where the trading volume is usually much much less than on CEXs, Id argue AMMs make more sense, as u acknowledge on the thread (it also allows for passive Liquidity Provision from any market maker, Yield Farming…etc). In an AMM, we can incentivise Liquidity Providers so they grow a Pool to a big TVL where trading can be somewhat capital efficient. Moreover, Liquidity doesnt depend on a centralised Market Maker, and we dont depend on there always being a bidder and a taker, which Id argue is also inefficient, and not really scalable on-chain (I mean try to buy a token in bulk on Muesliswap ) .
Then you say “AMM is not a real innovation, but an inferior model that could be easily implemented and replicated on EVM”. Although that makes a lot of sense, Id argue that as the first DeFi builders on Cardano, we ought to look at what is working on other chains, and replicate it and improve upon it using the Cardano architecture. We have already done this, with things such as the FISO, LBE, MINt token, etc. and will do it in the future in tokeonomics, LP ADA staking, etc. So, just because we use the same model/pricing forumula than DEXs on Account Models, doesnt mean we arent innovating/bringing the DeFi space forward. There are many faces to a DEX, apart from the pricing forumula which ofc is very important. In the end, AMM is still a better UX than Order Book, especially in an emerging DeFi ecosystem with such low trading volume as Cardano. Its just a start, definitely!
But for now, I think starting off as CPMM makes a lot of sense as:
its more battle tested and familiar, and currently seems like the most efficient model to bring together big TVL and volume to a DEX and allow a good UX for traders and LPs
it is composable! Composability is a key feature of DeFi, and I do not think models such as CLOB or CLMM are as composable (did you know protocols like Alpha Homora cannot switch from Uniswap V2 to V3 because it is not as composable? or…why does Trader Joe (nr. 1 DEX on Avalanche) not have Concentrated Liquidity ?)
But, definitely agree that eUTXO will be better than Account Model for CLMM and CLOB!
Then, there are talks about some cool DEX out there on Cardano (which am also a big fan of dw ) that wants to combine CLOB and CLMM. Id say, bring it on, lets see how it works in practice! We will be watching