HOT AMM Overview

TL;DR

LPs are getting rekt by toxic order flow. HOT improves returns and maximizes capital efficiency for LPs, by internalizing MEV using an intent-based design.

How HOT AMM works

HOT was designed by Arrakis and Valantis Labs. It is built on the Valantis Modular DEX Framework. HOT is the first integration on Arrakis Modular and is powered by Arrakis's offchain market making infrastructure.

Hybrid Order Type

HOT is a first of its kind hybrid AMM design, that combines the permissionless properties of AMMs with the capital efficiency and non-toxic order flow of intents protocols.

HOT stands for Hybrid Order Type. HOT pools have two swap execution mechanisms:

• RfQ Quotes
• Permissionless AMM

RfQ Quotes

• Solvers compete for non-toxic uninformed order flow from intents protocols like CoW Swap, Uniswap X and 1inch Fusion.
• Permissioned solvers request quotes from an API, which calls the Arrakis off chain quoter and in turn issuing quotes as a signed intent. Solvers can use these signed quotes to fill order from the liquidity pool before the quotes expire.
• When executed, these signed quotes update the pool price playing a special role in keeping the price from becoming stale to mitigate against arbitrage.

Permissionless AMM

• A single concentrated liquidity position is used, akin to Uniswap v3. In addition a dynamic fee is implemented.
• A dynamic fee that increases over time is used to further protect the pool against stale price arbitrage, in the event that a RfQ Quotes hasn’t been issued onchain recently. This fee is reset at the time a RfQ signed quoted is executed onchain.