Related papers: Analysis of the RMM-01 Market Maker
The current design space of derivatives in Decentralized Finance (DeFi) relies heavily on oracle systems. Replicating market makers (RMMs) provide a mechanism for converting specific payoff functions to an associated Constant Function…
We investigate the most common type of blockchain-based decentralized exchange, which are known as constant function market makers (CFMMs). We examine the the market microstructure around CFMMs and present a model for valuing the liquidity…
Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
Constant Function Market Makers (CFMMs) are a family of automated market makers that enable censorship-resistant decentralized exchange on public blockchains. Arbitrage trades have been shown to align the prices reported by CFMMs with those…
Automated market makers, first popularized by Hanson's logarithmic market scoring rule (or LMSR) for prediction markets, have become important building blocks, called 'primitives,' for decentralized finance. A particularly useful primitive…
We study decentralized markets for goods whose utility perishes in time, with compute as a primary motivation. Recent advances in reproducible and verifiable execution allow jobs to pause, verify, and resume across heterogeneous hardware,…
This paper develops a robust mathematical framework for Constant Function Market Makers (CFMMs) by transitioning from traditional token reserve analyses to a coordinate system defined by price and intrinsic liquidity. We establish a…
Constant-function market makers (CFMMs), such as Uniswap, are automated exchanges offering trades among a set of assets. We study their technical relationship to another class of automated market makers, cost-function prediction markets. We…
Automated market makers (AMMs) are a new prototype of decentralised exchanges which are revolutionising market interactions. The majority of AMMs are constant product markets (CPMs) where exchange rates are set by a trading function. This…
We present a method for constructing Constant Function Market Makers (CFMMs) whose portfolio value functions match a desired payoff. More specifically, we show that the space of concave, nonnegative, nondecreasing, 1-homogeneous payoff…
The rise of Ethereum and other blockchains that support smart contracts has led to the creation of decentralized exchanges (DEXs), such as Uniswap, Balancer, Curve, mStable, and SushiSwap, which enable agents to trade cryptocurrencies…
Automated Market Makers (AMMs) have cemented themselves as an integral part of the decentralized finance (DeFi) space. AMMs are a type of exchange that allows users to trade assets without the need for a centralized exchange. They form the…
We study axiomatic foundations for different classes of constant-function automated market makers (CFMMs). We focus particularly on separability and on different invariance properties under scaling. Our main results are an axiomatic…
We suggest a framework to determine optimal trading fees for constant function market makers (CFMMs) in order to maximize liquidity provider returns. In a setting of multiple competing liquidity pools, we show that no race to the bottom…
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…
This paper develops a rigorous mathematical framework for analyzing Concentrated Liquidity Market Makers (CLMMs) in Decentralized Finance (DeFi) within a continuous-time setting. We model the evolution of liquidity profiles as…
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…
We consider the market microstructure of automated market makers (AMMs) from the perspective of liquidity providers (LPs). Our central contribution is a ``Black-Scholes formula for AMMs''. We identify the main adverse selection cost…
This paper compares mathematical models for automated market makers including logarithmic market scoring rule (LMSR), liquidity sensitive LMSR (LS-LMSR), constant product/mean/sum, and others. It is shown that though LMSR may not be a good…