Related papers: A Note on Optimal Fees for Constant Function Marke…
With the emergence of decentralized finance, new trading mechanisms called Automated Market Makers have appeared. The most popular Automated Market Makers are Constant Function Market Makers. They have been studied both theoretically and…
This work analytically characterizes impermanent loss for automated market makers (AMMs) in decentralized markets such as Uniswap or Balancer (CPMM). We derive a static replication formula for the pool's value using a combination of…
Market fragmentation across multiple Automated Market Makers (AMMs) creates inefficiencies such as costly arbitrage, unnecessarily high slippage and delayed incorporation of new information into prices. These inefficiencies raise trading…
Constant product markets with concentrated liquidity (CL) are the most popular type of automated market makers. In this paper, we characterise the continuous-time wealth dynamics of strategic LPs who dynamically adjust their range of…
We consider the social welfare that can be facilitated by a constant function market maker (CFMM). When there is sufficient liquidity available to the CFMM, it can approximate the optimal social welfare when all users transactions are…
An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as…
Constant-product market making functions were first introduced by Hayden Adams in 2017 to create Uniswap, a decentralised exchange on Ethereum. This enables users to exchange assets at any given rate. Some variations such as Balancer and…
Constant function market makers (CFMMs) are the most popular type of decentralized trading venue for cryptocurrency tokens. In this paper, we give a very general geometric framework (or 'axioms') which encompass and generalize many of the…
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
Liquidity and trading activity on constant function market makers (CFMMs) such as Uniswap, Curve, and Balancer has grown significantly in the second half of 2020. Much of the growth of these protocols has been driven by incentivized pools…
We present a mathematical formulation of liquidity provision in decentralized exchanges. We focus on constant function market makers of utility indifference type, which include constant product market makers with concentrated liquidity as a…
We study linear Fisher markets with satiation. In these markets, sellers have earning limits and buyers have utility limits. Beyond natural applications in economics, these markets arise in the context of maximizing Nash social welfare when…
Market equilibria of matching markets offer an intuitive and fair solution for matching problems without money with agents who have preferences over the items. Such a matching market can be viewed as a variation of Fisher market, albeit…
In decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees…
We consider a network pricing game on a parallel network with congestion effects in which link owners set tolls for travel so as to maximize profit. A central authority is able to regulate this competition by means of a (uniform) price cap.…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
Within this work we consider an axiomatic framework for Automated Market Makers (AMMs). AMMs are smart contracts that set prices for swaps on a pool of assets. By imposing reasonable axioms on the underlying utility function, we are able to…
We study Nash equilibria for inventory-averse high-frequency traders (HFTs), who trade to exploit information about future price changes. For discrete trading rounds, the HFTs' optimal trading strategies and their equilibrium price impact…
Constant function market makers (CFMMs) such as Uniswap, Balancer, Curve, and mStable, among many others, make up some of the largest decentralized exchanges on Ethereum and other blockchains. Because all transactions are public in current…
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a…