The return of price discovery mechanisms in the era of high throughput

One of the biggest problems in the cryptocurrency space is rarely discussed. To achieve permissionless markets, we replace the natural price discovery mechanism with formulas. This makes trading continuous and accessible, but it also removes the link to maintain price fairness. Price discovery has always been a natural part of market operation. Buyers and sellers trade openly, and prices are formed during the trading process. It doesn't require any formula or fixed curve; it's simply a way for the market to reach a consensus. With the development of decentralized finance (DeFi), this process has begun to change. Automated market makers (AMMs) open trading to everyone, replacing bid and ask prices with curves. Liquidity becomes stable, and markets no longer need counterparties to function. This undoubtedly improves the convenience and speed of trading, but in the process, some important factors have also changed. Prices are no longer formed through interaction but are derived from formulas. Virtual AMMs further advance this idea. They price perpetual contracts through formulas and oracles rather than actual trading. Markets have become predictable, but less and less linked to the demand and risk flows that once defined them. Factors that once drove market dynamics now exist only in the code. Uniswap v3 added new tools to improve accuracy. Liquidity providers can concentrate funds in smaller intervals, increasing efficiency. This is effective in increasing trading volume, but it also fragments the trade discovery process. Each interval reflects only a part of the market, not the whole. Liquidity has become specialized, and collective pricing mechanisms have disappeared. The Hidden Side of Credit The development path of lending markets has varied. Despite several design iterations of trading, lending markets have remained largely unchanged. Each protocol creates its own pools of funds with fixed yield curves and parameters controlled by governance mechanisms. Interest rates adjust automatically as capital utilization changes, but these adjustments rarely reflect changes in other markets. Borrowers compared data from different protocols, but the results never fully reflected the picture. Each market operates independently, with its own rules and liquidity. Capital stagnates because it lacks competitive pathways. Mechanisms that appear efficient from the outside often seem stagnant to users. Anyone who has borrowed or provided funds in these markets knows this all too well. You open several applications, compare interest rates, but still can't determine which rate reflects true market demand. Sometimes, you'll find that different markets under the same protocol give drastically different results. The system functions correctly, but feels inconsistent. Lessons from Hyperliquid Hyperliquid demonstrates that markets can regain autonomy without sacrificing efficiency. Its on-chain order book directly links trading activity to prices. Every buy, sell, and cancellation contributes to a real-time demand view. Prices begin to reflect trading participation again. This result reminds builders that minor inefficiencies are not problems to be eliminated, but rather signals. The gap between offers and offers, changes in offer depth, and the time required for price adjustments all reveal information. These differences indicate how the market reaches an agreement. Avon Structure Avon applies the same concept to the credit field. Each strategy is like an HLP vault: an independent lending market with its own logic and liquidity. Above these strategies, there is a coordinating layer, an on-chain order book, which connects all strategies by sharing information rather than pooling funds. When someone deposits, borrows, or repays, the shared layer is updated immediately. All strategies can observe these changes. Liquidity will automatically gravitate towards more favorable conditions. Interest rates are not set by regulators or external institutions, but are continuously formed by activities within the network. This mechanism is what allows Avon to operate without external market makers. The coordination layer itself becomes the balancing mechanism. Every transaction updates the market in real time, enabling liquidity to react to changes in all strategies. Over time, lending begins to function like trading. The market reflects participants' valuations of risk and reward as market conditions change. Credit becomes part of the real-time system that constitutes the modern trading system.

Consistency regression

MegaETH By centralizing all activities onto a shared sequencer, coordination was restored in a timely manner. Its high throughput and Giga Gas limitation made it possible to coordinate complex systems entirely on-chain. For the first time, lending markets were able to operate continuous order books without sacrificing transparency or performance. Avon was built upon this foundation. The network's shared environment enabled credit markets to quote prices and respond to each other in real time. Prices were formed publicly, within the same block space where every transaction was recorded. The discovery process became visible again. When the discovery process is transparent, pricing becomes fairer. Fair pricing attracts deeper liquidity and higher-quality capital. Institutional funds that rely on transparency can participate smoothly. The forces that once fragmented the market now reinforce each other. Liquidity flows faster, terms are better, and the market is more favorable to all participants. This is the possibility brought about by the era of high throughput: a system where discovery, coordination, and fairness operate within the same block space.