Stellar faces a critical choice between two AMM protocol designs. CAP37 interleaves pools with the orderbook for unified liquidity; CAP38 allows independent pools. The author argues CAP38's fragmentation creates arbitrage bot congestion and fee spikes that threaten Stellar's payment use case.
The piece analyzes two competing protocol proposals for Automated Market Makers on Stellar. CAP37 uses interleaved execution to consolidate liquidity; CAP38 permits multiple independent pools alongside the orderbook. The author argues CAP38 creates major risks. Real-world trading scenarios show multiple pools fragment liquidity, force users to split trades, and trigger arbitrage bot wars. When bots compete for arbitrage opportunities, transaction fees spike to unsustainable levels—$10 per transaction—effectively freezing payments for regular users. CAP37 requires upfront investment in interleaved execution but solves fragmentation and fee spikes permanently. The piece contends that protocol design choices made now determine whether Stellar can maintain its payment and remittance viability under high volatility.
