Lo, Y;
Medda, F;
(2022)
Uniswap and the rise of the decentralized exchange, in:Journal of Financial Market Infrastructures, 2021, 10(2):1-25.
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Abstract
Despite blockchain based digital assets trading since 2009, there has been a functional gap between (1) on-chain transactions and (2) trust based centralized exchanges. This is now bridged with the success of Uniswap, a decentralized exchange. Uniswap's constant product automated market maker enables the trading of blockchain token pairs without relying on market makers, bids or asks. This overturns centuries of practice in financial markets, and constitutes a potential building block of a new decentralized financial system. We apply ARDL and VAR methodologies to a dataset of 999 hours of Uniswap trading, and conclude that its simplicity enables liquidty providers and arbitrageurs to ensure the ratio of reserves match the trading pair price. We find that changes in Ether reserves Granger causes changes in USDT reserves.
| Type: | Working / discussion paper |
|---|---|
| Title: | Uniswap and the rise of the decentralized exchange, in:Journal of Financial Market Infrastructures, 2021, 10(2):1-25 |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | https://dx.doi.org/10.2139/ssrn.3715398 |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Uniswap, Decentralized exchange, Blockchain, Ethereum, Tokenomics |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10121380 |
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