On October 11th, the depth of the CEX order book evaporated by 70% in a short period of time.
This day suddenly became a turning point in why the future market will inevitably require DEXs.
The traditional order book model relies on market makers placing orders frequently to maintain market stability. Once panic strikes and risk escalates rapidly, market makers will immediately withdraw their orders to hedge, causing prices to instantly gap up. This is called the liquidity illusion.
That day was deeply memorable, watching the vast majority of altcoins sell at half their value.
The AMM mechanism on DEXs represents real, algorithmically guaranteed liquidity, relying not on the will of market makers but on the promise of a transparent algorithm.
➤ Let's take a deeper look at AMM vs. Five key differences in order book stability, security, and transparency
1. Liquidity Source
Order Book Model (Quotes Available at Any Time)
Market depth is maintained by market makers or traders who maintain continuous orders. During periods of market panic, market makers often withdraw their orders to hedge risks, causing a sudden loss of liquidity and creating a liquidity vacuum.
AMM Model (Locked-Up Real Funds)
Liquidity is generated by users depositing real funds into the liquidity pool. Funds are locked in smart contracts and cannot be withdrawn due to human emotions. Even with drastic price fluctuations, the algorithm automatically quotes prices on the curve and provides continuous execution.
2️⃣ Price Formation Mechanism
Order Book Model
Prices are determined by matching market orders. If orders disappear, prices will gap, resulting in significant slippage.
AMM Model (Curve Guarantees Price Continuity)
Prices are automatically determined using a mathematical formula (such as the CLMM curve), with liquidity concentrated in key trading ranges. Even in volatile markets, the price curve remains continuous, and slippage is predictable and gradual.
3️⃣ System Stability
Order Book Model
Depending on centralized servers and APIs, system delays, matching interruptions, or trading halts are common during extreme market conditions.
AMM Model
No single point of failure, operating entirely on-chain smart contracts without the need for centralized matching.
4️⃣ Risk and Behavioral Transparency
Order Book Model
The order placement, cancellation, and matching processes are all conducted in a black box, making it impossible for ordinary users to understand market maker behavior or the true depth of the market.
AMM Model
All funds, liquidity distribution, slippage, and reward mechanisms are publicly visible on-chain. Users can instantly verify liquidity and fee sources, ensuring fairness and transparency.
5️⃣ Market Recovery Mechanism
Order Book Model
After a crash, market depth must be restored by market makers, resulting in a slow recovery.
AMM Model
Liquidity is not withdrawn; the system automatically rebalances. Trading continues amidst fluctuations, allowing the market to recover naturally.
➤ Momentum @MMTFinance, the largest Dex on Sui, has passed the test.
Looking back on that night, Momentum, leveraging Sui's parallel execution and programmable transaction block (PTB) technology, maintained high throughput and fast finality during the flash crash.
Unlike chains like Ethereum, which experience congestion and MEV attacks during periods of high pressure, Sui Its object-oriented architecture isolates each pool independently, preventing liquidity chain shocks.
➤ But is Momentum just a Dex? It's much more than that.
Momentum X
Combining identity verification, on-chain compliance, and cross-chain interoperability, only one identity verification is required, and all subsequent on-chain activity is automatically identified.
RWA tokens based on the same underlying asset can be interoperable and merged across different chains and issuers, creating a unified market depth. This means that compliant institutions will be able to conduct large-scale transactions on-chain in the future.
Momentum's Tool Layer
- TGL (Token Generation Lab): A platform for token issuance and liquidity activation.
- Vaults: Users can participate in LPs with one click without having to manage their own positions.
- xSUI Liquid staking, multi-strategy automated vaults, and cross-chain liquidity integration
- The MSafe multi-sig system ensures asset security for institutions and high-net-worth individuals
Momentum, only six months after its launch, has consistently ranked first in Sui in terms of 24-hour, 7-day, and 30-day average transaction volume (this was before ve(3,3) was launched). Buildpad HODL is the most reliable way to participate.
My team still has spots available; if you're interested, please leave a comment on this post to join.
Join the team for those who are interested
