Hayden Adams, the inventor of the Uniswap protocol, and two paradigm developers, Dave White and Dan Robinson, are working on a new automated market maker (AMM) for decentralized exchanges. The proposed solution will address the issues associated with processing large trades on Ethereum. According to a tweetstorm published by White, and an article on Paradigm’s website, the project is still at an initial stage and contributors are welcome to send in their suggestions.

I’ve been working on a new type of automated market maker with @danrobinson and @haydenzadams.

The Time-Weighted Average Market Maker, or TWAMM (pronounced “tee-wham”), helps traders on Ethereum efficiently execute large orders.https://t.co/nvCPDJIrlY pic.twitter.com/XgdW5Jixd7

— Dave White (@_Dave__White_) July 28, 2021

Uniswap Creator and Two paradigm Developers Are Building  a New AMM

Presently, traders have to break down their larger Ethereum orders into several installments and execute them over hours. This is due to the fact that orders of this size are quite expensive to process on existing AMMs like Uniswap.

However, this approach is also not entirely efficient since it incurs a higher cost from the gas fees on all the sub-orders and carries the risk of active trading.

To resolve these issues, Adams, White and Robinson are developing a “Time-Weighted Automated Market Maker”, or TWAMM. They proffer that this project would help traders process large orders by splitting them into “infinitely many infinitely small virtual orders to ensure perfectly smooth execution over time.”

Additionally, the solution would leverage a “special mathematical relationship with its embedded AMM” to gradually write off the gas fees associated with the orders.

The Current State of AMMs Used By Decentralized Exchanges

Most decentralized exchanges (DEX) these days use AMMs that allow for permissionless trading of digital assets, using liquidity pools instead of traditional buyers and sellers. While they are widely popular on Ethereum, AMMs come with their own set of problems. These are especially relevant when discussing bigger trades. 

Like traditional finance, investors opting for large buy and sell orders must seek a broker who can execute an algorithmic trade — or a Time-Weighted Average Price order. Brokers can significantly reduce the transaction charges by lowering or completely eliminating the complexity on multiple smaller trades.

The new TWAMM project is targeted at this need for intermediaries. White claims that it is an “on-chain equivalent” of the TWAP trade, and also less susceptible to “sandwich attacks”. Should it become successful, the project can considerably improve the quality and security of big orders on the ETH network.