Futuristic DEX cityscape with cryptocurrency streams and an oracle overseeing fair prices.

Navigating the Future of Crypto Trading: Is UAMM the Key to Fairer DEXs?

Rhea Morgan in Tech & Innovation December 2025 • 4 min read.

"Discover how UBET AMM (UAMM) is revolutionizing decentralized exchanges by tackling impermanent loss and arbitrage, offering a more secure and profitable trading experience."

Decentralized exchanges (DEXs) have transformed the way we trade cryptocurrencies, offering a transparent and accessible alternative to traditional centralized exchanges. At the heart of these platforms are automated market makers (AMMs), algorithms that determine the price of digital assets and facilitate trades without the need for intermediaries. However, existing AMM models have significant drawbacks, particularly for liquidity providers (LPs) who risk impermanent loss and are vulnerable to arbitrage bots.

Traditional AMMs, like those used by Uniswap and Curve, rely solely on the liquidity pool's internal balances to determine asset prices. This approach can lead to significant discrepancies between the DEX price and the broader market price, creating arbitrage opportunities that often benefit sophisticated traders at the expense of LPs. Furthermore, the delayed reaction to market changes in existing AMMs exacerbates these issues, especially in volatile market conditions.

Enter UBET AMM (UAMM), a novel approach designed to address the shortcomings of traditional AMMs. UAMM incorporates external market prices into its calculations, aiming to eliminate arbitrage opportunities and minimize impermanent loss for liquidity providers. By combining internal and external data, UAMM seeks to create a more balanced and efficient trading environment on decentralized exchanges.

How Does UAMM Work? A Breakdown of the Key Components

Futuristic DEX cityscape with cryptocurrency streams and an oracle overseeing fair prices.

UAMM's core innovation lies in its ability to calculate prices based on both external market data and the internal state of the liquidity pool. This dual approach allows UAMM to estimate a fair price for the asset while also considering the impact of trades on the pool's balance. Here's a breakdown of the key components:

The fair price is determined by an external oracle, which provides real-time market data from various sources. This ensures that the UAMM price aligns with the broader market, reducing arbitrage opportunities.

Slippage Calculation: UAMM uses a sophisticated slippage calculation that takes into account the desired target balance for the liquidity pool. This target balance encourages the pool to minimize impermanent loss.
Constant Product Curve: Despite relying on external prices, UAMM maintains the desired properties of a constant product curve when computing slippage, ensuring predictable and efficient trades.
Price Decomposition: UAMM decomposes the price into an estimated fair price and a slippage component, allowing for a more granular and responsive pricing mechanism.

By incorporating these components, UAMM aims to create a more stable and profitable environment for liquidity providers, while also ensuring fair and efficient trading for all users.

The Future of DEXs: UAMM as a Catalyst for Growth

UAMM represents a significant step forward in the evolution of decentralized exchanges. By addressing the key challenges of impermanent loss and arbitrage, UAMM has the potential to unlock new levels of liquidity and participation in the DeFi ecosystem. As DEXs continue to gain traction and challenge traditional financial systems, innovations like UAMM will be crucial for ensuring their long-term sustainability and success.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2308.06375,

Title: Uamm: Price-Oracle Based Automated Market Maker

Subject: cs.lg cs.ce q-fin.cp

Authors: Daniel Jiwoong Im, Alexander Kondratskiy, Vincent Harvey, Hsuan-Wei Fu

Published: 11-08-2023

Everything You Need To Know

What is UBET AMM (UAMM) and how does it differ from traditional AMMs like Uniswap and Curve?

UBET AMM (UAMM) is a novel automated market maker designed to improve decentralized exchanges (DEXs). Unlike traditional AMMs such as those employed by Uniswap and Curve, which depend solely on the liquidity pool's internal balances to determine asset prices, UAMM incorporates external market prices from oracles. This integration aims to eliminate arbitrage opportunities, which typically benefit sophisticated traders and lead to impermanent loss for liquidity providers. UAMM uses a dual approach, considering both external market data and the liquidity pool's internal state to calculate prices, creating a more stable and efficient trading environment.

How does UAMM aim to minimize impermanent loss for liquidity providers?

UAMM seeks to minimize impermanent loss through several mechanisms. Firstly, by incorporating external market data via an oracle, UAMM reduces the price discrepancies between the DEX and the broader market, thus reducing the potential for arbitrage that can exacerbate impermanent loss. Secondly, UAMM employs a sophisticated slippage calculation that considers the desired target balance for the liquidity pool, encouraging the pool to maintain a more stable value ratio. Finally, it decomposes the price into an estimated fair price and a slippage component, allowing for a granular and responsive pricing mechanism. All these features aim to create a more balanced and efficient trading environment.

What are the key components of the UAMM price calculation, and how do they work together?

The core of UAMM's innovation lies in its price calculation. The fair price is determined by an external oracle, which feeds real-time market data from various sources. This ensures alignment with the broader market, reducing arbitrage. UAMM uses a slippage calculation that factors in the desired target balance to minimize impermanent loss. Despite relying on external prices, UAMM maintains the properties of a constant product curve when computing slippage, ensuring predictable and efficient trades. Furthermore, UAMM decomposes the price into an estimated fair price and a slippage component, which provides a more granular and responsive pricing mechanism.

What role do oracles play in the functionality of UBET AMM?

Oracles are essential to the operation of UBET AMM (UAMM). They provide real-time market data from external sources, which UAMM uses to determine the fair price of assets. This external market data ensures that UAMM prices align with the broader market, which helps reduce the potential for arbitrage opportunities. By integrating external data, UAMM can avoid the price discrepancies and delayed reactions to market changes that can occur with traditional AMMs that rely solely on internal liquidity pool data. This external market price feed enables UAMM to create a more stable and fair trading environment.

How might UBET AMM impact the future of decentralized exchanges (DEXs) and the broader DeFi ecosystem?

UBET AMM (UAMM) has the potential to significantly impact the future of decentralized exchanges (DEXs). By addressing the key challenges of impermanent loss and arbitrage, UAMM can unlock new levels of liquidity and participation within the DeFi ecosystem. The incorporation of external market prices and sophisticated slippage calculations makes DEXs fairer and more attractive to liquidity providers. As DEXs continue to evolve and challenge traditional financial systems, innovations like UAMM will play a crucial role in ensuring their long-term sustainability and success by offering more stable and efficient trading environments. This could lead to greater adoption and wider use of DEXs in the future.