The Zero One Automated Market Maker (ZAMM) is a novel DeFi primitive that brings AMM-like passive liquidity to orderbook-based derivative markets. Built directly on top of 01 Exchange and Serum’s perpetual derivative markets, ZAMM provides deep passive liquidity to the 01 derivative orderbook according to the traditional constant product (xyk) automated market maker model. Similar to how Atrix and Raydium provides passive liquidity to Serum’s spot markets, ZAMM brings this tool to derivative markets.
Currently, 01 Exchange relies on market makers to provide liquidity across all of its markets. While this already makes 01 one of the most liquid DEX’s, liquidity can still be vastly improved by placing passive liquidity across the books. That’s where ZAMM comes to play. ZAMM allows any user to stake their liquidity into the DEX similarly to AMMs. This allows 01 to decrease its reliance on market makers and also guarantee that there is always deep liquidity available for traders.
What are the risks associated toZAMM?
ZAMM is exposed to the risk of impermanent loss just like any other AMM. However, it is important to note that ZAMM can also be exposed to funding payments if funding is opposite to ZAMM’s position.
However, to offset potential losses, ZAMM quotes its orders with a spread allowing users to earn fees on every trade. Additionally, the 01 team is working on multiple updates that can reward ZAMM stakers and increase ZAMM’s profitability.