TLDR Tech / Crypto
Adverse Selection Is DeFi's Core Market Structure Problem
DeFi's biggest structural flaw is adverse selection, where transparent onchain order flow allows informed traders and MEV searchers to extract value, forcing market makers to widen spreads and raising costs for everyone. The post outlines six mitigation strategies: delays, hiding intent, flow segmentation, dynamic pricing, refusing flow, and social coordination. Execution design is the next competitive frontier for DEXs seeking tighter spreads, better UX, and sustainable liquidity.
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