Corpus ID: 236447606

Constant Function Market Makers: Multi-Asset Trades via Convex Optimization

  title={Constant Function Market Makers: Multi-Asset Trades via Convex Optimization},
  author={Guillermo Angeris and Akshay Agrawal and Alex Evans and T. Chitra and Stephen P. Boyd},
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 without trusting a centralized authority. While traditional exchanges use order books to match and execute trades, DEXs are typically organized as constant function market makers (CFMMs). CFMMs accept and reject proposed trades based on the evaluation of a… Expand
2 Citations

Figures from this paper

Differential Privacy in Constant Function Market Makers
  • T. Chitra
  • Computer Science
  • IACR Cryptol. ePrint Arch.
  • 2021
This paper analyzes a simple privacy-enhancing mechanism called Uniform Random Execution and proves that it provides (, δ)-differential privacy and investigates the worst case complexity over all private CFMM mechanisms. Expand
The Replicating Portfolio of a Constant Product Market with Bounded Liquidity
  • Joseph Clark
  • 2021
We derive the replicating portfolio and greeks for a constant product market with bounded liquidity such as Uniswap v3. The portfolio value is concave in the relative price of pool assets, shortExpand


Liquidity Implication of Constant Product Market Makers
A growing number of blockchain-based decentralized exchanges (DEX) have adopted constant product market makers (CPMM)—a single-function algorithm to pin down the execution price for a trade. We buildExpand
Optimal Fees for Geometric Mean Market Makers
This work develops a framework for determining the value to LPs of supplying liquidity to a CFMM with fees when the underlying process follows a general diffusion, and illustrates the methodology by showing that an LP with mean-variance utility will prefer a G3M over all alternative trading strategies as fees approach zero. Expand
Liquidity Provision by Automated Market Makers
A growing number of blockchain-based decentralized exchanges have adopted automated market makers to attract liquidity, and they replace the traditional order book system for trade execution. ThisExpand
When does the tail wag the dog? Curvature and market making.
Liquidity and trading activity on constant function market makers (CFMMs) such as Uniswap, Curve, and Balancer has grown significantly in the second half of 2020. Much of the growth of theseExpand
Improved Price Oracles: Constant Function Market Makers
This paper focuses on the analysis of a very large class of automated market makers, called constant function market makers (or CFMMs), which includes existing popular market makers such as Uniswap, Balancer, and Curve, whose yearly transaction volume totals to billions of dollars. Expand
Multi-Period Trading via Convex Optimization
A framework for single-period optimization, where the trades in each period are found by solving a convex optimization problem that trades off expected return, risk, transaction cost and holding cost such as the borrowing cost for shorting assets. Expand
A Next-Generation Smart Contract and Decentralized Application Platform
When Satoshi Nakamoto first set the Bitcoin blockchain into motion in January 2009, he was simultaneously introducing two radical and untested concepts. The first is the "bitcoin", a decentralized Expand
  • 2016
Present-day blockchain architectures all suffer from a number of issues not least practical means of extensibility and scalability. We believe this stems from tying two very important parts of theExpand
Replicating Market Makers
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,Expand
Combinatorial Information Market Design
  • R. Hanson
  • Economics, Computer Science
  • Inf. Syst. Frontiers
  • 2003
This work introduces market scoring rules, and considers several design issues, including how to represent variables to support both conditional and unconditional estimates, how to avoid becoming a money pump via errors in calculating probabilities, and how to ensure that users can cover their bets, without needlessly preventing them from using previous bets as collateral for future bets. Expand