Centralized exchanges like Binance and Kraken manage limit order books off-chain. These are orders to purchase or sell an asset at an optimal price in contrast to market orders, which execute at the current market price. Managing limit order books on-chain in DeFi is costly due to the sheer volume of orders.

Another downside of DeFi is the inability to apply TradFi's dealership model, where dealers use asset inventories in OTC trading, which involves establishing trustworthy relationships. Anonymous transactions in DeFi render such intermediation unfeasible, and what's more, it runs contrary to the intermediary-free ethos.

Decentralized exchanges (DEXs) consequently resort to automated market-making to leverage limit order books and the dealership model. In AMM protocols, liquidity …