Multicoin Co-founder: Must Decentralization Be Slower Than Centralization? PropAMM Is Breaking This Bias

Author: Kyle Samani, Co-founder of Multicoin

Translation: Azuma, Odaily Planet Daily

Editor’s Note: The man known for calling the shots on Solana, and the former high-profile co-founder of Multicoin Capital Kyle Samani, is making a comeback!

Last night, Kyle Samani posted a long thread on his personal X account. In the post, he revisited his persuasive “call” (not a negative term here), using the efficiency dimension—an Achilles’ heel of decentralized narratives—as a breakthrough point. He detailed how the PropAMM currently promoted within the Solana ecosystem will match or even surpass traditional centralized models in efficiency, proving that PropAMM is one of the most important innovations in market microstructure in recent years or even decades.

Below is the original content:

PropAMM is one of the most important innovations in market microstructure in recent years, and perhaps the most significant in decades.

To help everyone understand this conclusion, let’s first look at how market makers (MM) quote prices on traditional centralized exchanges (CEX).

Market makers typically co-locate physically with the trading platform. Each market maker runs their algorithm on a server connected via a uniform length of network cable (e.g., 50 meters) to another server hosting the exchange system.

There is continuous data flow back and forth between the market maker and the exchange. Every time a market maker sends an order—be it a limit order, cancel, or market order—the exchange broadcasts this information to all other market makers; then they update their orders based on the new info; and this cycle repeats endlessly.

Here is a simple diagram.

Now, let’s see how PropAMM on Solana’s mainnet works.

The beauty of PropAMM on Solana is that the blockchain itself directly “hosts” the market maker algorithms. This means the system no longer needs billions of messages exchanged between market makers and the exchange; instead, the market-making algorithms run directly on the same physical machine as the exchange.

The new diagram looks like this. (Yes, just the Solana blockchain is enough!)

In the crypto industry, there’s a common saying: because decentralized systems need to communicate across global nodes, they are inherently slower (higher latency) than centralized systems.

But if you look at this differently, on-chain hosted algorithms might actually have lower latency than traditional centralized financial trading platforms.

Why is that? Because the latency involved in updating prices with PropAMM only involves electrons moving within the same silicon chip. For example, if a market order causes the SOL-USD price to change, this information is immediately visible to all PropAMMs and used for the next market order pricing. Everything happens inside the same silicon chip, eliminating the need for bidirectional communication between servers.

Note that PropAMM does require frequent oracle updates, but that’s not a problem; it doesn’t change the overall picture I described above.

The key point remains: when the exchange— in this case, the Solana blockchain— directly hosts the PropAMM algorithms, market makers’ pricing updates happen in real-time within the same physical silicon.

PropAMM has already become the dominant mechanism for SOL-USDC spot quotes on Solana, with narrower spreads than all major CEXs. I expect this market structure to become the dominant on-chain trading model this year, including spot, perpetuals, and even prediction markets.

The biggest challenge for PropAMM is that currently, there’s no guarantee that takers will always get the best execution, because:

· All PropAMM algorithms are not public (which is reasonable, as traditional market-making algorithms are also private);

· Routing trades across multiple PropAMMs results in non-deterministic outcomes.

However, this problem can be solved. I expect all related aggregator teams this year to launch solutions, such as Jupiter and dFlow for spot, and Phoenix for derivatives.

Currently, PropAMM is still not fully optimized and is limited by various constraints of the Solana blockchain itself. This year, Solana will roll out a series of major upgrades that will significantly enhance PropAMM’s performance, including:

1. Higher CU (compute unit) limits per transaction and larger trade sizes;

2. Increased CU limits per block;

3. Alpenglow: reducing slot time from 400ms to 100–150ms;

4. DoubleZero: lowering global network latency;

5. Application-controlled execution;

6. Multiple concurrent leaders.

If, without these upgrades, PropAMM on Solana’s mainnet can already offer narrower quotes than all CEXs, imagine how powerful it will become once these upgrades are fully implemented.

Read more: The transformation of Kyle Samani, the “best crypto investor in history,” reflecting a mirror of ten years ago.