As the market begins to enter the DeFi 2.0 era, a question is becoming increasingly clear: is the AMM architecture still a suitable foundation for building next-generation financial products? This is not a philosophical question but a technical one. With high-speed trading products requiring deep liquidity, high stability, and good risk prediction capabilities, AMM is starting to reveal its inherent limitations.
In this context, Injective serves as a prime example of how an order book-native chain can redefine how liquidity operates in DeFi. Not because Injective is faster or cheaper, but because the order book structure aligns with the logic of much more complex financial markets than traditional AMMs.
From a technical perspective, the biggest issue with AMM in DeFi 1.0 is shallow liquidity. With mechanistic pricing such as constant product or hybrid curve, liquidity is spread out rather than concentrated, leading to high slippage when volume is large and the risk of pool imbalance when prices move sharply. This is suitable for regular spot trading but completely unsuitable for perps, options, or any market requiring fast and accurate matching in a very short time.
DeFi 2.0 is shifting towards products that require scale and structures similar to CeFi. When orders need to be matched according to market depth rather than a curve, the order book becomes the most natural structure.
A common misconception is that 'order books are only suitable for fast chains.' While that is true, it is not sufficient. For order books to operate correctly, the chain needs not only speed but three factors: low but stable block time, low but predictable transaction costs, and a consistent state update mechanism so that oracles and matching systems do not fall out of sync. The current state of EVM struggles to achieve this at scale.
Injective, thanks to its no-mempool design, fixed block time, and integrated matching engine at the chain layer, fulfills this entire requirement. This makes Injective's order book not just 'simulated by smart contracts,' but a native infrastructure.
The real logic that makes Injective stand out in the DeFi 2.0 era is that they do not use the order book as an application but as a primitive — a foundational layer. Applications do not need to build their own order books, do not need to adjust liquidity risks with AMM, and do not need to simulate matching. They simply call into the chain's module. This reduces complexity, minimizes errors, and lowers operational costs.
In an experiment I once ran while backtesting a micro-hedging strategy, Injective's order book maintained high accuracy and almost no slippage during significant market volatility. This is something that AMM cannot replicate, even on other high-speed chains.
Moreover, order book chains like Injective have a significant advantage: the ability to accurately reflect market conditions.
AMM presents liquidity according to mathematical models.
The order book reflects liquidity according to user behavior.
When you read the order book, you see positions, depth, liquidity distribution, and the market's risk appetite. This is the data that DeFi 2.0 needs to build derivative products, structured finance, synthetic assets, and algorithmic strategies.
The impact of Injective choosing the order book as its infrastructure goes beyond just better order matching. It creates an ecosystem capable of scaling liquidity both horizontally and vertically.
When a new application emerges, instead of having to build liquidity from scratch, they can immediately tap into the shared order book. This is similar to how traditional financial exchanges operate — centralized liquidity, but a decentralized application. This accelerates the bootstrap speed of new protocols and reduces the risk of fragmented liquidity as seen in DeFi 1.0.
A deeper impact is how Injective facilitates professional market makers entering the market. Market makers do not like AMM due to IL risk and unpredictable mechanisms. They are accustomed to order books, where they can place orders according to strategy, manage positions, control inventory, and reduce risk. When the order book is at the chain layer, market makers can interact directly without being limited by gas-heavy smart contracts.
This is why liquidity on Injective is deep and stable even when the market is volatile. The order book is always the natural environment for market makers.
Another factor contributing to Injective's role in DeFi 2.0 is fast finality. When the market moves in milliseconds, speed becomes a risk factor. Slow chains create slow liquidations, pending transactions, and skewed oracles. Injective eliminates all of these risks with fixed block time and no mempool.
This allows products such as perps, options, or cross-chain synthetic assets to operate stably — something that AMM is not flexible enough to support.
The long-term opportunity for Injective in the DeFi 2.0 era comes from the fact that on-chain financial markets are getting closer to the architecture of traditional markets. When large capital flows want to deploy complex strategies, they are not looking for AMM; they are seeking order book infrastructure where liquidity is concentrated, order matching speed is high, and risk is well-controlled.
Injective could become the 'mini CME' of on-chain finance: a platform for derivatives, hedging, and structured products at scale.
And the most important thing: Injective does not aim to replace AMM. Injective places the order book at the foundation to support the entire financial market that is evolving towards high speed and high accuracy requirements.
In DeFi 2.0, AMM still exists, but the order book becomes the standard for professional-level liquidity. Injective is leading this transformation.
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