Related papers: Impermanent Loss Conditions: An Analysis of Decent…
Automated Market Makers (AMMs) are essential in Decentralized Finance (DeFi) as they match liquidity supply with demand. They function through liquidity providers (LPs) who deposit assets into liquidity pools. However, the asset trading…
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…
As an integral part of the decentralized finance (DeFi) ecosystem, decentralized exchanges (DEXs) with automated market maker (AMM) protocols have gained massive traction with the recently revived interest in blockchain and distributed…
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…
The asset trading volume on blockchain-based exchanges (DEX) increased substantially since the advent of Automated Market Makers (AMM). Yet, AMMs and their forks compete on the same blockchain, incurring unnecessary network and block-space…
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…
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…
This paper studies liquid staking tokens (LSTs) on automated market makers (AMMs), both theoretically and empirically. LSTs are tokenized representations of staked assets on proof-of-stake blockchains. First, we model LST-liquidity on AMMs…
Automated Market Makers (AMMs) are an integral component of the decentralized finance (DeFi) ecosystem, as they allow users to exchange crypto-assets without the need for trusted authorities or external price oracles. Although these…
Automated market makers (AMMs) allocate fee revenue \textit{proportional} to the amount of liquidity investors deposit. In this paper, we study the economic consequences of the competition between passive liquidity providers (LPs) caused by…
In this paper, we analyze traders' behavior within both centralized exchanges (CEXs) and decentralized exchanges (DEXs), focusing on the volatility of Bitcoin prices and the trading activity of investors engaged in perpetual future…
The limit order book mechanism has been the core trading mechanism of the modern financial market. In the cryptocurrency market, centralized exchanges also adopt this limit order book mechanism and a centralized matching engine dynamically…
Automated market makers (AMMs) quote prices from pool state rather than from a limit order book. AMM pools often stay close to a reference price because arbitrageurs correct profitable mispricing. A large part of decentralized finance…
Automated Market Makers (AMMs) hold assets and are constantly being rebalanced by external arbitrageurs to match external market prices. Loss-versus-rebalancing (LVR) is a pivotal metric for measuring how an AMM pool performs for its…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
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…
We consider the impact of trading fees on the profits of arbitrageurs trading against an automated market maker (AMM) or, equivalently, on the adverse selection incurred by liquidity providers (LPs) due to arbitrage. We extend the model of…
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…
This paper introduces and analyzes \emph{defensive rebalancing}, a novel mechanism for protecting constant-function market makers (CFMMs) from value leakage due to arbitrage. A \emph{rebalancing} transfers assets directly from one CFMM's…
This article analytically characterizes the impermanent loss of concentrated liquidity provision for automatic market makers in decentralised markets such as Uniswap. We propose two static replication formulas for the impermanent loss by a…