On-chain trading has come a long way since order books first made their debut a little over ten years ago. Clunky, slow swaps on early decentralized platforms evolved into faster, more efficient platforms. Automated Market Makers (AMMs) were a real game-changer, but now we've reached a point where DeFi is ready for the next step in its evolution - the decentralized lending exchange (DLEX) model. Ammalgam is the first protocol to fuse trading and lending into a single, capital-efficient system for a more cohesive experience in DeFi.

But before we dive into the specifics behind Ammalgam's model, we need to look at the journey of on-chain trading and why now is the time for this new paradigm.

Initially, decentralized exchanges (DEXs) leaned heavily on on-chain order books to mimic centralized platforms like Coinbase or Kraken without an intermediary or third party to facilitate the transfer and custody of the assets. Projects like EtherDelta allowed users to post buy and sell orders directly on the blockchain, focusing on transparency and self-custody. But this came with trade-offs. Every order placement, cancellation, or execution required an on-chain transaction, racking up gas fees and dragging out trade times. Low-liquidity markets often left traders waiting hours - sometimes days - for a match.

Liquidity was another pain point. With buyers and sellers spread thin, order book DEXs couldn’t compete with the deep pools and instant trades of centralized exchanges (CEXs). Many traders chose to stick with CEXs, leaving early DEXs in the dust. Until AMMs arrived.

2018 was pivotal for DeFi with the arrival of Automated Market Makers, spearheaded by Uniswap. Instead of matching counterparties, AMMs introduced liquidity pools. These were smart contracts holding paired assets that traders could swap against instantly. Using a simple formula (x*y=k), the pools ensured constant availability of assets, obliterating the liquidity woes of order book DEXs. Anyone could put tokens into a pool, provide liquidity, and earn fees, opening up DeFi like never before.

The impact was seismic. Trades executed in seconds, not hours. Emerging tokens found a home without needing CEX listings. But AMMs had their drawbacks. Cross-chain swaps were not possible, big trades faced slippage, and liquidity providers grappled with impermanent loss when prices spiked or crashed.

By 2020, Curve emerged, fine-tuning the AMM model for stablecoins. Its custom bonding curve slashed slippage for assets with tight price parity, such as stablecoins or wrapped tokens. This approach boosted capital efficiency and attracted yield-seekers. In 2021, Uniswap V3 introduced concentrated liquidity, letting providers pinpoint price ranges for their funds. The results were less idle capital and higher fees for less exposure, turning liquidity provision into a sharper, more strategic game.

These upgrades enhanced AMMs technically and reshaped DeFi’s landscape. Curve made stablecoin swaps cheap and reliable, giving rise to lending protocols. Uniswap V3 introduced makers precision tools while keeping things decentralized. As much of an improvement as this was, the lack of limit orders and persistent volatility remained. The new topic of interest and debate shifted to ways of pairing up AMMs’ strengths with something more.

When hybrid models entered the scene in 2022, we saw AMM liquidity blend with order book precision. Liquidity pools powered fast swaps, while on-chain limit orders let traders set exact prices, cutting reliance on pool-driven pricing. The order book offered a fallback for big trades prone to slippage, minimizing price impact. Layer 2 solutions like Arbitrum slashed gas costs, making these systems viable. Hybrids tackled slippage, impermanent loss, and control issues, hinting at a more adaptable future for DeFi trading.

Cross-chain DEXs were yet another leap, enabling direct swaps across blockchains without bridges or wrapped tokens. They reduced fragmentation and boosted efficiency by pooling liquidity across chains. Still, higher costs, complex setups, and security risks tied to interoperability could not be avoided. The promise of seamless multi-chain trading was tempting, but execution lagged.

It took several years of ideation and development before Ammalgam made it from a theory to pre-mainnet execution. A new decentralized lending exchange, built from the ground up on a fork of Uniswap V2 as a new primitive that combines trading and lending into one protocol. Ammalgam’s DLEX splits its core logic into seven modular contracts, each handling specific functions like lending, borrowing, and liquidity provisioning. This design delivers AMM-style efficiency without oracles, dodging price feed exploits while maximizing capital efficiency.

The goal here is to go beyond quick swaps. Ammalgam supports advanced strategies like delta-neutral liquidity provision, straddles, and leveraged market making that traders and liquidity providers can customize for more flexibility. The permissionless, over-collateralized structure and absence of fees create a lean, robust system that unlocks higher yields and deeper liquidity. Plugged into the broader DeFi ecosystem, Ammalgam paves the way for integrated, seamless on-chain finance.

Launching in 2025 was a strategic decision as the DEX industry hit $460B in trading volume by December 2024. As the sector grows its liquidity pools and rolls out new features, we believe trading and lending aren’t separate silos but a unified, efficient powerhouse in the next stage of DeFi.

On-chain trading’s journey - from sluggish order books to AMMs, hybrids, and now DLEXs - maps out a process of continuous innovation. This is not to say we've seen all issues like fragmented liquidity and clunky cross-chain swaps solved. But solutions are accelerating. Ammalgam’s DLEX model could be the next big leap with its blend of speed, low costs, and strategic depth.

Have more questions? Join us at our bi-weekly AMAs in Discord and learn straight from our founder, Will Fey, and the team behind DeFi's next frontier.

On-chain trading has come a long way since order books first made their debut a little over ten years ago. Clunky, slow swaps on early decentralized platforms evolved into faster, more efficient platforms. Automated Market Makers (AMMs) were a real game-changer, but now we've reached a point where DeFi is ready for the next step in its evolution - the decentralized lending exchange (DLEX) model. Ammalgam is the first protocol to fuse trading and lending into a single, capital-efficient system for a more cohesive experience in DeFi.

But before we dive into the specifics behind Ammalgam's model, we need to look at the journey of on-chain trading and why now is the time for this new paradigm.

Initially, decentralized exchanges (DEXs) leaned heavily on on-chain order books to mimic centralized platforms like Coinbase or Kraken without an intermediary or third party to facilitate the transfer and custody of the assets. Projects like EtherDelta allowed users to post buy and sell orders directly on the blockchain, focusing on transparency and self-custody. But this came with trade-offs. Every order placement, cancellation, or execution required an on-chain transaction, racking up gas fees and dragging out trade times. Low-liquidity markets often left traders waiting hours - sometimes days - for a match.

Liquidity was another pain point. With buyers and sellers spread thin, order book DEXs couldn’t compete with the deep pools and instant trades of centralized exchanges (CEXs). Many traders chose to stick with CEXs, leaving early DEXs in the dust. Until AMMs arrived.

2018 was pivotal for DeFi with the arrival of Automated Market Makers, spearheaded by Uniswap. Instead of matching counterparties, AMMs introduced liquidity pools. These were smart contracts holding paired assets that traders could swap against instantly. Using a simple formula (x*y=k), the pools ensured constant availability of assets, obliterating the liquidity woes of order book DEXs. Anyone could put tokens into a pool, provide liquidity, and earn fees, opening up DeFi like never before.

The impact was seismic. Trades executed in seconds, not hours. Emerging tokens found a home without needing CEX listings. But AMMs had their drawbacks. Cross-chain swaps were not possible, big trades faced slippage, and liquidity providers grappled with impermanent loss when prices spiked or crashed.

By 2020, Curve emerged, fine-tuning the AMM model for stablecoins. Its custom bonding curve slashed slippage for assets with tight price parity, such as stablecoins or wrapped tokens. This approach boosted capital efficiency and attracted yield-seekers. In 2021, Uniswap V3 introduced concentrated liquidity, letting providers pinpoint price ranges for their funds. The results were less idle capital and higher fees for less exposure, turning liquidity provision into a sharper, more strategic game.

These upgrades enhanced AMMs technically and reshaped DeFi’s landscape. Curve made stablecoin swaps cheap and reliable, giving rise to lending protocols. Uniswap V3 introduced makers precision tools while keeping things decentralized. As much of an improvement as this was, the lack of limit orders and persistent volatility remained. The new topic of interest and debate shifted to ways of pairing up AMMs’ strengths with something more.

When hybrid models entered the scene in 2022, we saw AMM liquidity blend with order book precision. Liquidity pools powered fast swaps, while on-chain limit orders let traders set exact prices, cutting reliance on pool-driven pricing. The order book offered a fallback for big trades prone to slippage, minimizing price impact. Layer 2 solutions like Arbitrum slashed gas costs, making these systems viable. Hybrids tackled slippage, impermanent loss, and control issues, hinting at a more adaptable future for DeFi trading.

Cross-chain DEXs were yet another leap, enabling direct swaps across blockchains without bridges or wrapped tokens. They reduced fragmentation and boosted efficiency by pooling liquidity across chains. Still, higher costs, complex setups, and security risks tied to interoperability could not be avoided. The promise of seamless multi-chain trading was tempting, but execution lagged.

It took several years of ideation and development before Ammalgam made it from a theory to pre-mainnet execution. A new decentralized lending exchange, built from the ground up on a fork of Uniswap V2 as a new primitive that combines trading and lending into one protocol. Ammalgam’s DLEX splits its core logic into seven modular contracts, each handling specific functions like lending, borrowing, and liquidity provisioning. This design delivers AMM-style efficiency without oracles, dodging price feed exploits while maximizing capital efficiency.

The goal here is to go beyond quick swaps. Ammalgam supports advanced strategies like delta-neutral liquidity provision, straddles, and leveraged market making that traders and liquidity providers can customize for more flexibility. The permissionless, over-collateralized structure and absence of fees create a lean, robust system that unlocks higher yields and deeper liquidity. Plugged into the broader DeFi ecosystem, Ammalgam paves the way for integrated, seamless on-chain finance.

Launching in 2025 was a strategic decision as the DEX industry hit $460B in trading volume by December 2024. As the sector grows its liquidity pools and rolls out new features, we believe trading and lending aren’t separate silos but a unified, efficient powerhouse in the next stage of DeFi.

On-chain trading’s journey - from sluggish order books to AMMs, hybrids, and now DLEXs - maps out a process of continuous innovation. This is not to say we've seen all issues like fragmented liquidity and clunky cross-chain swaps solved. But solutions are accelerating. Ammalgam’s DLEX model could be the next big leap with its blend of speed, low costs, and strategic depth.

Have more questions? Join us at our bi-weekly AMAs in Discord and learn straight from our founder, Will Fey, and the team behind DeFi's next frontier.