The Problem
While existing chains have forced users to rely primarily on AMMs due to high gas costs and slow block times, Monad's performance improvements enable true on-chain orderbooks to operate alongside AMMs for the first time.
Market Structure Analysis
| Feature | Orderbooks | AMMs |
|---|---|---|
| Long-tail assets | Requires market making | Passive |
| Precise pricing | Yes | Depends on model and liquidity |
| Less slippage / price impact | Dependent on depth | Deterministic |
| Constant liquidity | Active management | Automatic |
Core Technical Challenges
Structure Mismatch
- AMMs define liquid markets through continuous mathematical functions (e.g., x*y=k constant product curves)
- Traditional orderbooks operate with discrete limit orders at specific prices
- These fundamentally different expressions of liquidity must be normalized for comparison
Dynamic Efficiency Trade-offs
- Orderbooks excel at price discovery and typically offer minimal slippage for trades within their liquidity depth
- AMMs guarantee always-available liquidity but with deterministic price impact
- The optimal mix between these venues varies based on market conditions and trade size
Execution Complexity
- Each venue type has different execution costs and gas requirements
- Price impact calculations differ between AMMs and orderbooks
- Route optimization must consider both immediate price impact and gas costs
- Splitting orders across venues requires careful size optimization
Monorail has create an innovative solution to this problem, and for the first time, enables the integration of AMMs and orderbooks into a unified trading experience.