GammaSwap V1 began as an experiment: could we turn the Uniswap-style AMM into a viable options market?

By redesigning a traditional AMM into a two-sided market for borrowing and providing liquidity, V1 increased yields beyond what AMMs like Uniswap V2 could offer alone. Over time, however, we realized the yield was still not enough to justify the risk liquidity providers were taking.

The architecture of the AMM needs to evolve. That is what we are building towards with GammaSwap V2.

Problems With V1

1. Price discovery

AMMs are excellent at aggregating liquidity, but they are slow to update prices. This creates opportunities for arbitrageurs to extract value from LPs through adverse selection, especially during volatile markets.

2. Capital efficiency

Since GammaSwap V1 relied on full-range AMM liquidity, leveraged exposure required a large amount of collateral backing each position. In some cases, achieving 4x leveraged returns required up to 10x collateral support from liquidity providers, limiting the scalability of the system.

3. Complexity

While GammaSwap V1 could be used to successfully hedge LP exposure, users still needed to understand advanced options concepts such as delta, gamma, and volatility exposure. This created friction for mainstream adoption.

V2

GammaSwap V2 will combine an order book with an AMM via a crypto binary prediction market.

The first product will be simple: short-duration crypto markets where users bet whether an asset will be up or down by expiration.

For example: will ETH go up or down in 15 minutes?

This is a more user-friendly version of options trading and a natural evolution for GammaSwap.

Here is how V2 will improve the user experience:

• Dead simple UX. Just bet if the price will be up or down by expiration.
• Higher leverage. There are no liquidations so the expiration can be extremely short (1M, 5M, 15M).
• Easy Math (No Greeks). Expected return and risk is priced in the contract (80c Up means you will earn 20c if you are right and lose 80c if you are wrong by settlement).

The simplicity of these binary markets and the short durations are a massive upgrade compared to TradFi options.

Hybrid Architecture

GammaSwap V2 uses an off-chain order book sequencer with on-chain settlement on Base.

The order book sequencer handles high-frequency price discovery and matching, while the blockchain remains the source of truth for settlement, custody, and transparency.

We believe this is the natural evolution of Web3 market structure by applying a proven framework for decentralized, low latency settlement popularized by L2s.

Blockchains are exceptionally good at:

• Transparent Settlement
• Self-custody
• Permissionless Access
• Verifiable Execution

Order books are exceptionally good at:

• Fast Matching
• Efficient Price Discovery
• Handling Active Markets

Rather than forcing every part of the system fully on-chain, V2 combines the architecture to provide the best of both worlds. This allows GammaSwap to preserve the core advantages of blockchain technology while delivering a significantly better trading experience.

Where the V2 AMM fits in

In V2, the AMM will be designed to support the order book rather than replace it.

This creates several advantages vs traditional AMMs:

• Real-time quoting: The AMM can use order book data to quote more accurately, reducing reliance on arbitrageurs and toxic flow.
• Better LP compensation: Traders often overpay for unique, leveraged exposure. By facilitating these markets, liquidity providers can earn more than they would in spot AMMs.
• Purpose-built design: Unlike V1, which was built on top of existing AMM architecture, V2 gives us the ability to optimize every layer of the system.

The order book will support the most liquid markets first. The AMM will be integrated later to support less liquid markets, multiple strikes, and new market types without fragmenting liquidity.

We can support different types of binary markets like will BTC stay within the $80,000 - $90,000 price range? If you are a spot UniV3 LP within that range, you can bet no and lock in that hedge without worrying about variable funding. The simplicity is an advantage over GammaSwap V1.

Moving Forward

We will launch the CLOB first, starting with crypto up/down markets and other short-duration products.

A public testnet will come before the mainnet launch. Stay tuned for more announcements on both.

There are no plans to deprecate V1. However, future development, marketing, and incentives will be focused on V2.

Thank you for reading, feel free to direct any concerns you might have in our Discord server and the team will respond directly.