Related papers: DEX Specs: A Mean Field Approach to DeFi Currency …
The trustless nature of permissionless blockchains renders overcollateralization a key safety component relied upon by decentralized finance (DeFi) protocols. Nonetheless, factors such as price volatility may undermine this mechanism. In…
Decentralized finance (DeFi) markets spread across Layer-1 (L1) and Layer-2 (L2) blockchains rely on arbitrage to keep prices aligned. Today most price gaps are closed against centralized exchanges (CEXes), whose deep liquidity and fast…
Exchanges acquire excess processing capacity to accommodate trading activity surges associated with zero-sum high-frequency trader (HFT) "duels." The idle capacity's opportunity cost is an externality of low-latency trading. We build a…
We find an approximate Nash equilibrium in a game between decentralized exchanges (DEXs) that compete for order flow by setting dynamic trading fees. We characterize the equilibrium via a coupled system of partial differential equations and…
We develop a mixed control framework that combines absolutely continuous controls with impulse interventions subject to stochastic execution delays. The model extends current impulse control formulations by allowing (i) the controller to…
Financial speculators often seek to increase their potential gains with leverage. Debt is a popular form of leverage, and with over 39.88B USD of total value locked (TVL), the Decentralized Finance (DeFi) lending markets are thriving.…
This paper extends the theoretical framework introduced in Liquidity Pools as Mean Field Games: A New Framework, where the interactions among traders in a constant product market-making protocol were modeled using mean field games (MFG). In…
We coin the term *Protocols for Loanable Funds (PLFs)* to refer to protocols which establish distributed ledger-based markets for loanable funds. PLFs are emerging as one of the main applications within Decentralized Finance (DeFi), and use…
Automated Market Makers (AMMs) are major centers of matching liquidity supply and demand in Decentralized Finance. Their functioning relies primarily on the presence of liquidity providers (LPs) incentivized to invest their assets into a…
Blockchains, and specifically smart contracts, have promised to create fair and transparent trading ecosystems. Unfortunately, we show that this promise has not been met. We document and quantify the widespread and rising deployment of…
Stablecoins are a class of cryptocurrencies which aim at providing consistency and predictability, typically by pegging the token's value to that of a real world asset. Designing resilient decentralized stablecoins is a challenge, and…
The efficiency of decentralized exchanges (DEXs) and the influence of token routing algorithms on market performance and stakeholder outcomes remain underexplored. This paper introduces the concept of Standardized Total Arbitrage Profit…
Decentralized perpetuals protocols have collectively reached billions of dollars of daily trading volume, yet are still not serious competitors on the basis of trading volume with centralized venues such as Binance. One of the main reasons…
The XRP Ledger (XRPL) is a peer-to-peer cryptographic ledger. It features a decentralized exchange (DEX) where network participants can issue and trade user-defined digital assets and currencies. We present Jack the Rippler, a bot that…
We find the equilibrium contract that an automated market maker (AMM) offers to their strategic liquidity providers (LPs) in order to maximize the order flow that gets processed by the venue. Our model is formulated as a leader-follower…
Liquidity providers are currently incentivised to provide liquidity through the LP Incentives Programme on dYdX. Based on the various parameters - makerVolume, depths and spreads, they are rewarded accordingly based on their activities.…
We propose a mathematically rigorous framework for identifying and completing Coincidence of Wants (CoW) cycles in decentralized exchange (DEX) aggregators. Unlike existing auction based systems such as CoWSwap, our approach introduces an…
This empirical study presents the Decentralized Exchanges Comparison Service (DECS), a novel tool developed by 1inch Analytics to assess exchange efficiency in decentralized finance. The DECS utilizes swap transaction monitoring and…
PinFi is a class of novel protocols for decentralized pricing of dissipative assets, whose value naturally declines over time. Central to the protocol's functionality and its market efficiency is the role of liquidity providers (LPs). This…
We propose a mean field game model to study the question of how centralization of reward and computational power occur in Bitcoin-like cryptocurrencies. Miners compete against each other for mining rewards by increasing their computational…