Related papers: The Pricing And Hedging Of Constant Function Marke…
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
Three traits of decentralized finance are studied. First, the market impact function is derived for optimal-growth liquidity providers. For a standard random walk, the classic square-root impact is recovered. An extension is then derived to…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…
Currently cryptocurrencies and Decentralized Finance (DeFi), which enable financial services on public blockchains, represents a new growing trend in finance. In contrast to financial markets, ruled by traditional corporations, DeFi is…
The role of a market maker is to simultaneously offer to buy and sell quantities of goods, often a financial asset such as a share, at specified prices. An automated market maker (AMM) is a mechanism that offers to trade according to some…
As of August 2022, blockchain-based assets boast a combined market capitalisation exceeding one trillion USD, among which the most prominent are the decentralised autonomous organisation (DAO) tokens associated with decentralised finance…
Blockchain benefits are due to immutability, replication, and storage-and-execution of smart contracts on the blockchain. However, the benefits come at increased costs due to the blockchain size and execution. We address three fundamental…
Trading on decentralized exchanges has been one of the primary use cases for permissionless blockchains with daily trading volume exceeding billions of U.S.~dollars. In the status quo, users broadcast transactions and miners are responsible…
Blockchain enables peer-to-peer transactions in cyberspace without a trusted third party. The rapid growth of Ethereum and smart contract blockchains generally calls for well-designed Transaction Fee Mechanisms (TFMs) to allocate limited…
Layer-2 (L2) blockchains inherit Ethereums security guarantees while reducing gas fees. As a result, they are gaining traction among traders at Automated Market Makers (AMMs), sparking debate over whether they contribute to liquidity…
Blockchain is a decentralized system that allows transaction transmission and storage according to the roles of the Consensus algorithm and Smart contracts. Non-fungible tokens (NFTs) consolidate the best characteristics of blockchain…
As an emerging decentralized secure data management platform, blockchain has gained much popularity recently. To maintain a canonical state of blockchain data record, proof-of-work based consensus protocols provide the nodes, referred to as…
In recent years, prominent blockchain systems such as Bitcoin and Ethereum have experienced explosive growth in transaction volume, leading to frequent surges in demand for limited block space and causing transaction fees to fluctuate by…
To trade tokens in cryptoeconomic systems, automated market makers (AMMs) typically rely on liquidity providers (LPs) that deposit tokens in exchange for rewards. To profit from such rewards, LPs must use effective liquidity provisioning…
This paper develops a model to evaluate the viability of blockchain markets as the sole venue for price formation. Blockchains clear at discrete intervals called block time, and transactions are executed sequentially according to priority…
Nearly one-half of all trades in financial markets are executed by high-speed, autonomous computer programs -- a type of trading often called high-frequency trading (HFT). Although evidence suggests that HFT increases the efficiency of…
Our study provides a survey on how existing stablecoins-- cryptocurrencies aiming at price stabilization-- peg their value to other assets, from the perspective of Decentralized Payment Systems (DPSs). This attempt is important because…
Automated market makers (AMMs) are pricing mechanisms utilized by decentralized exchanges (DEX). Traditional AMM approaches are constrained by pricing solely based on their own liquidity pool, without consideration of external markets or…
Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…
In this paper, we outline a framework for modeling utility-based blockchain-enabled economic systems using Agent Based Modeling (ABM). Our approach is to model the supply dynamics based on metrics of the cryptoeconomy. We then build…