Hayden Adams, the founder of Uniswap, has published his first blog post since 2019, arguing that automated market makers will end up serving the biggest markets rather than remaining a long-tail venue, according to The Defiant. The specific mechanism he proposes is that tokenized stocks should be quoted against index funds instead of against dollars.

An automated market maker, or AMM, is a pool of two assets priced by a formula rather than an order book. Liquidity providers deposit both sides and earn fees, and their principal risk is what the industry calls impermanent loss: when the two assets move apart in price, the pool rebalances into the loser, and the provider ends up worse off than if they had simply held.

The logic of Adams's suggestion follows directly from that. Impermanent loss is a function of divergence. Pair a single stock against the dollar and the divergence is the entire move in the stock. Pair it against a broad index token, where most of the single name's variance is market beta shared with the index, and only the idiosyncratic residual causes divergence. In theory the pool holds together better and quotes tighter for the same capital.

The objection

The reply from the trading side, per The Defiant's account, was blunt. A former trader at XTX Markets, one of the largest electronic market makers in traditional equities, argued that AMMs are going to zero. The practical objection surfaced in the responses was simpler still: who actually wants to sell NVIDIA in exchange for SPY?

That question is not rhetorical. Correlated pairs solve a problem for the liquidity provider and create one for the taker. Equity flow is overwhelmingly denominated in cash, because the end user wants cash or wants a different position sized in cash. A market where you can only rotate between a single name and an index adds a second leg to almost every trade, and each additional leg costs spread. The design optimises for the side that supplies inventory rather than the side that consumes it.

There is also the professional market maker's point of view, which the XTX critique implies. In liquid equities, spreads are set by firms with latency advantages and inventory models that a constant-function pool cannot replicate. An AMM that quotes continuously without adjusting to information is, from that seat, a source of adverse selection rather than a competitor.

Why it matters here

This is not an academic argument for anyone building tokenized equity venues. If stock tokens are going to trade onchain at scale, they will trade on some mechanism, and today the default mechanism is an AMM. Robinhood Chain, the Arbitrum-based Layer 2 built for financial services and real-world assets, is a concrete illustration: DefiLlama data shows Uniswap V3 and V4 handling $231.9m and $213.7m respectively of the chain's $495.1m in 24 hour DEX volume, roughly nine tenths of the total between them.

So the venue question is already answered in practice while it is still being debated in theory. Whether correlated pairs are the fix depends on evidence that has not yet been produced at scale: pools quoting single names against index tokens, with measurable spreads and liquidity provider returns to compare against dollar pairs. Until someone runs that experiment with real size, both sides of this exchange are asserting rather than demonstrating.

The Defiant reported the responses split between investors who found the thesis disruptive and traders who did not. That split is roughly the same one that has run through market structure debates since the first electronic crossing networks, and it usually gets settled by fill quality rather than by argument.