What is a PropAMM?

TL;DR: A PropAMM is an onchain market maker run by a trading firm that prices trades with its own capital and its own strategy, instead of letting a pool formula set the price. WOOFi has operated one since 2021, and it is now the engine behind tens of millions of dollars in RWA and crypto assets being traded onchain everyday.

An AMM is a smart contract that lets you swap tokens onchain without waiting for someone to fill your order. You trade against the contract, the contract holds the liquidity, and the whole thing settles in one transaction.

For reference, an AMM stands for automated market maker. Conventional AMMs price every trade with a set formula that reads the balances in the pool and returns a price. Simple, transparent, and it works well when the pool is deep.

The weakness shows up when the pool is thin. The larger your order relative to the pool, the worse the price it can offer. And when prices skew, there's nothing to push the price back unless someone trades it back in the correct direction. That gap is slippage, and it is the reason a new asset or a new chain struggles to attract volume: the liquidity has to be bootstrapped before trading feels normal.

What the proprietary part means

Proprietary refers to who is doing the market making. In a Propriety (prop) AMM, a trading firm supplies its own capital and applies its own pricing and risk strategy, the same way a professional market maker does on a centralized exchange.

The difference from a centralized desk is where the quotes live. A PropAMM like WOOFi publishes its prices onchain through a smart contract and refreshes them from price feeds. Anyone can trade against those quotes, at any hour, without an account, a counterparty agreement, or a custodian holding the funds.

That combination is the point. You get exchange-grade pricing logic, and you keep the properties that make onchain trading worth using: self-custody, permissionless access, and settlement in a single transaction.

How WOOFi prices a trade

WOOFi's version is called sPMM, short for synthetic proactive market making, and it has been running since 2021.

The contract does not price from pool balances. Price, spread and depth are simulated based on centralized exchange orderbooks. Quotes refresh as the market moves, with an oracle update triggered as the price on centralized exchanges change.

Three practical results follow:

• Capital efficiency. A PropAMM does not need a large, passive liquidity pool. WOOFi has historically turned over the liquidity in the pool 200%-1000% per day, facilitating many trades in a short time frame.
• Less slippage on size. Because the quote comes from the market rather than the pool balance, an order does not push the price against itself the way it does on a standard pool.
• Fewer attack surfaces. The previous point also prevents Sandwich attacks, where attackers frontrun your transaction to move up the price, then sell it back to you for a profit.

WOOFi runs this as one pool per chain rather than a separate pool for every pair. Multiple assets share one quote side, which keeps the design from fragmenting liquidity every time a new market is added.

Why this matters for tokenization

Tokenized stocks, ETFs and other real-world assets are arriving onchain, and the volume expected over the next few years is measured in trillions.

That wave runs straight into a liquidity problem. The same stock can end up issued by several providers, on several chains, each with its own pool. Splitting a market five ways rarely produces five healthy markets. It usually produces five thin ones, and thin markets cannot support the order sizes that institutional flow needs.

A PropAMM changes the shape of that problem. Pricing does not depend on how much capital is sitting in a specific pool, so a new listing can serve real size on day one, and the same mechanism works for an asset that trades around the clock.

Trade it

WOOFi runs PropAMM markets across Arbitrum, Optimism, Base, BNB Chain, Avalanche, Polygon, HyperEVM and Monad, and powers zero-fee stock and ETF trading at woofi.com.

If you want the mechanics in more detail, the WOOFi documentation covers the pricing model and the oracle setup.