Related papers: Efficient Liquidity Providing via Margin Liquidity
Decentralized Exchanges (DEXs) are new types of marketplaces leveraging Blockchain technology. They allow users to trade assets with Automatic Market Makers (AMM), using funds provided by liquidity providers, removing the need for order…
Automated market makers are a popular mechanism used on decentralized exchange, through which users trade assets with each other directly and automatically through a liquidity pool and a fixed pricing function. The liquidity provider…
Trade execution on Decentralized Exchanges (DEXes) is automatic and does not require individual buy and sell orders to be matched. Instead, liquidity aggregated in pools from individual liquidity providers enables trading between…
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…
Uniswap is a decentralized exchange (DEX) and was first launched on November 2, 2018 on the Ethereum mainnet [1] and is part of an Ecosystem of products in Decentralized Finance (DeFi). It replaces a traditional order book type of trading…
Decentralized exchanges (DEXs) provide a means for users to trade pairs of assets on-chain without the need for a trusted third party to effectuate a trade. Amongst these, constant function market maker DEXs such as Uniswap handle the most…
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…
Decentralized exchanges (DEXes) have introduced an innovative trading mechanism, where it is not necessary to match buy-orders and sell-orders to execute a trade. DEXes execute each trade individually, and the exchange rate is automatically…
We investigate the behavior of liquidity providers (LPs) by modeling a decentralized cryptocurrency exchange (DEX) based on Uniswap v3. LPs with heterogeneous characteristics choose optimal liquidity positions subject to uncertainty…
Uniswap v3 is the largest decentralized exchange for digital currencies. A novelty of its design is that it allows a liquidity provider (LP) to allocate liquidity to one or more closed intervals of the price of an asset instead of the full…
Decentralized Finance (DeFi) is a rapidly evolving segment of blockchain technology that enables a transformative approach to financial services through Web3 applications. By leveraging smart contracts, DeFi allows developers to build…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…
This document analyzes price discovery in cryptocurrency markets by comparing centralized and decentralized exchanges, as well as spot and futures markets. The study focuses first on Ethereum (ETH) and then applies a similar approach to…
Decentralised exchanges (DEXs) have transformed trading by enabling trustless, permissionless transactions, yet they face significant challenges such as impermanent loss and slippage, which undermine profitability for liquidity providers…
We study the economic viability of liquidity provision in decentralised exchanges (DEXs) within a structural framework in which market outcomes are endogenous. We formulate strategic interactions as a sequential game: a risk-averse…
One of the exciting recent developments in decentralized finance (DeFi) has been the development of decentralized cryptocurrency exchanges that can autonomously handle conversion between different cryptocurrencies. Decentralized exchange…
Decentralized exchanges (DEXs) are a cornerstone of decentralized finance (DeFi), allowing users to trade cryptocurrencies without the need for third-party authorization. Investors are incentivized to deposit assets into liquidity pools,…
We study Just-in-time (JIT) liquidity provision in blockchain-based decentralized exchanges. A JIT liquidity provider (LP) monitors pending swap orders in public mempools of blockchains to sandwich orders of their choice with liquidity,…
While online interactions and exchanges have grown exponentially over the past decade, most commercial infrastructures still operate through centralized protocols, and their success essentially depends on trust between different economic…
Financial regulators have long-standing concerns about fully decentralized exchanges that run 'on-chain' without any obvious regulatory hooks. The popularity of Uniswap, an automated market makers (AMM), made these concerns a reality. AMMs…