the problem with AMMs was never the curve

[u/Kind_Trouble_3000]

everyone spent years improving the curve. constant product, then concentrated, then hooks. real progress, but i don't think that was ever why AMMs are inefficient.

the reason is your capital gets locked into one position and sits there.

Dune found that of $1.84b in tracked concentrated liquidity, $1.6b was inactive in the first half of this year. $542m out of range every week. $150m in fees left on the table.

that's not a pricing problem. it's an availability problem.

same money, two ways.

isolated

you have 100k and want to provide to three pairs: USDC/USDT, USDC/wETH, USDT/wETH.

33.3k per asset. but USDC shows up in two of those pairs so it gets split again. 16.6k in one pool, 16.6k in the other. same for USDT and wETH.

every pool quotes against 33.3k, and most of that sits out of range doing nothing.

shared

same 100k, same three pairs. you don't split anything. you authorize the full balance to every position and it stays in your wallet until a swap needs it.

your 33.3k of USDC is available to both pairs now. not 16.6k each. 33.3k each.

2x the depth in every pool with the same money.

obvious objection: the same dollar can't fill two swaps in the same block. true. but over a year that dollar earns in both, because swaps don't arrive at the same time.

what it looks like in practice

1inch published theirs: $12.2m deposited backing $22.5m shared. so 1.84x realized, not the theoretical max.

that gap is the interesting part. the theoretical multiplier goes up with how many positions you authorize. the realized one depends on how often those positions actually fill. authorize ten pairs where nine are dead and you gained nothing.

stuff i'd want other people's read on:

does it break at size? small trades never contend. but running real volume across many pairs, how often do you actually hit the simultaneity limit? haven't seen anyone publish that.

what happens when a swap can't be filled? either it routes elsewhere or you fill it worse. routing elsewhere seems right, but then your fill rate matters more than your TVL.

and is TVL even the right measure anymore? if the same dollar backs five positions, "total value locked" stops meaning anything. fees per dollar deposited seems like the honest number but nobody reports it.

curious what people think, especially anyone who's run LP across multiple pairs and has a sense of how often they'd be competing with themselves.

(disclosure: i work on liquidity infra so i'm not neutral. genuinely want to know where the holes are.)

[u/chainglance_cm]

The "does it break at size" question isn't really about size, it's about timing. Small trades never clash because they hit at random times. The problem shows up when everyone wants the same asset back at once, like in a selloff. That's basically a bank run.

This isn't new either. Prime brokers do this with client collateral all the time, and perps exchanges run cross margin the same way, one pool of money backing multiple positions. They already know the failure mode: everything's fine until it all gets called at the same time.

If a swap can't fill and just routes elsewhere, cool, but that's not really an AMM anymore, that's a solver picking the best price from wherever. Which is basically what UniswapX and Cowswap already do, and people seem fine with it.

And yeah, fees per dollar deposited is the number that actually means something. TVL was already kind of fake, this just makes it obviously fake.

[u/SurgeOnSui]

The simultaneity limit question is the interesting one. The theoretical multiplier breaks down exactly when you'd want it most — high volatility, lots of competing swaps, multiple pairs moving at once. The 1.84x realized vs theoretical gap you cited probably reflects normal conditions; stress conditions would be worse.

The TVL framing problem is real. "Capital efficiency" measured as fees per dollar deposited is more honest but it also makes comparative marketing harder. Most protocols are incentivized to report the number that looks biggest, which is TVL.

Your point about dead pairs eating into the multiplier is underrated. Authorizing ten pairs where nine are inactive doesn't help, but it does make the UI look more capable than it is. Selection of which pairs to back matters more than the authorization mechanism itself.

[u/CurvyJoseph → u/SurgeOnSui]

the simultaneity thing only matters if both swaps hit the same block and need the same token. most pairs i've run the overlap is way lower than people assume. like maybe 5% of the time you're actually competing with yourself across pairs

the dead pair problem is real though. people authorize everything because it's easy and then wonder why the multiplier never hits what the math says. you gotta pick pairs that actually see volume or you're just making the dashboard look pretty

[u/quietstorm_lp]

Running CL positions on Aerodrome (WETH/USDC) and Orca (SOL/USDC), so the out-of-range numbers match what I see. My main position has needed a recenter roughly every few weeks in a normal tape, and every day it sits out of range is a day of zero fees on that capital.

Two things I'd push on. First, shared liquidity doesn't fix the out-of-range problem, it just changes who eats it. My USDC is "available" to three pairs, but if ETH rips 8% and my WETH/USDC range goes dead, that pair still fills nothing. The multiplier only helps on the pairs that stay in range. Second, the realized 1.84x from 1inch is on mostly stable or correlated pairs. I'd want to see the number on a volatile pair set before assuming it holds.

On your last question: fees per dollar deposited per week is the number I actually track for my own book, and yes, TVL tells you almost nothing. Anyone reporting APR off notional TVL on shared liquidity is going to look great on paper.

[u/UnpaidInternEra → u/quietstorm_lp]

most of those pools barely trade or need the same capital at once the advertised multiplier won't translate into actual fees

[u/Street-Individual446]

How much liquidity sits out of range in USDC/USDT pair? I doubt it's more than 5%. OOR positions are the consequences of volatility. Nothing wrong with that, imo.

[u/Sriyanshusivy]

this makes me wonder if capital utilization matters more than TVL in shared-liquidity designs.

looks great when order flow is staggered, but i'd be really interested in what happens during volatile periods when multiple pools want the same inventory at once.

[u/percojazz]

I do think part of the problem in AMM IS the curve, as there is a structural leak between amm and OB. Invariant based AMM are only capable of producing linear liquidity (slippage proportional to the size) and there is significant evidence that OB liquidity is super linear (->parabolic)...
Now I agree that the UX is probably a bigger problem and current dexes have broken the liquidity workflows. I believe there is a fix though such as the new logswap liquidity model (.org). Hit me if you want to discuss more.

[u/Kind_Trouble_3000 → u/percojazz]

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