Ambient founder touts advantages of single-contract DEX architecture

A single contract structure allows a DEX to behave like one market, Colkitt says


NaturePicsFilms/Shutterstock modified by Blockworks


Uniswap, the largest crypto decentralized exchange by volume, recently broke news of a series of planned updates, including the introduction of a single contract pool structure.

The “singleton contract” is not yet implemented on Uniswap, but similar technology can already be found on the Ambient decentralized exchange, or DEX

Founder of the competing DEX, Doug Colkitt, spoke to Blockworks on an upcoming episode of the 0xResearch podcast (Spotify / Apple) about the advantages of the new slimline design.

“The big deal” with the new architecture, Colkitt says, is that in previous DEXs, “every time you had a new pool, you had to stand up a new contract.”

“It meant that every single contract was individually managing its own collateral.”

“Standing up a pool,” Colkitt explains, is a relatively “heavyweight” task that deploys a costly contract to the mainnet. 

“You’re talking about a few hundred dollars,” which isn’t much for a larger-scale project, but to experiment on the cheap, he says, “it’s not great.”

More importantly, Colkitt says, a single contract allows a DEX to behave like one market rather than a collection of separate ones interacting with each other. Without the new design, “I’m trading between different markets,” he says.

Trading between two tokens and ether (ETH) would normally involve numerous steps, jumping from one pool to another to complete the trades, with gas fees incurred at each step. “That’s pretty heavyweight and unnecessary.”

“At the end of the day, ETH just winds up back at the market.”

“The tokens are all in a central location. The pools are separate, but they’re just lightweight data structures inside a larger contract.”

This design reduces restrictions between markets, making them more efficient, according to Colkitt. It also adds some interesting trading possibilities that were not possible under the previous multi-contract architecture.

“You can do interesting stuff with flash accounting,” he explains. “You can trade in one pool and you don’t actually need to fill in those tokens until the end of the trade.” 

“So it also makes arbitrage a lot lower cost.”

Reducing toxic flow

Podcast host Dan Smith notes that transferring tokens incurs about half the gas cost of an ERC-20 trade on DEXs like Uniswap or Curve, reducing the capacity for arbitrage.

Colkitt says that the single contract design lowers the profitability threshold on arbitrages. Thus, prices will “stay in line” with markets more efficiently over time because arbitrages can be performed at “smaller discrepancies.”

Additionally, lowering the barriers to arbitrage could potentially reduce “toxic flow,” a problem whereby predatory traders can cause market makers to provide liquidity at a loss.

“If you lower the barriers to arbitrage,” Colkitt says, “it actually decreases the total amount of toxic flow” on any particular trade. Increasing the number of trades at smaller increments is better for liquidity providers, he explains.

“Ultimately,” he says, “you get the same total toxic flow, but you get a lot more arbitrage trades.” Therefore, liquidity providers collect more fees over time, resulting in “a better deal.”

The fact that Uniswap is also planning, among its improvements, to build a single contract is “good validation” for Ambient, he says. 

Colkitt explains that when the team started working on the new design, people were skeptical, asking, “Is that a good idea? Should you put everything in one contract?”

“At least I never have to answer that question again.”

Subscribe to 0xResearch on Spotify or Apple so you don’t miss this episode!

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. What you can expect: And more! Don’t miss out on the opportunity to be in the room when the future of crypto is decided. Join us and help shape the future of our […]

recent research

Research report - cover graphics-2.jpg


Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as which has seen significant traction.


The bitcoin halving slated for April 2024 — an event expected to spur upward price action for BTC — could be a boon for Block’s stock price, analysts say


Seed Club founder Jess Sloss is excited to “open the doors and let other people see what we’ve been seeing for the last few months”


Blockchain is a “natural fit” in games based on open economies and user-generated content, says Wyatt


Their current stance is a half-baked attempt that could stifle innovation and burden an emerging industry


Maker’s DeFi-focused “subDAO” passed a proposal activating a lending market for DAI on the Gnosis Chain


Certain creditors could be repaid sooner, with one hedge fund exec telling Blockworks it expects a payout by the end of the year