Xu, Jiahua;
Paruch, Krzysztof;
Cousaert, Simon;
Feng, Yebo;
(2022)
SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols.
ACM Computing Surveys
10.1145/3570639.
(In press).
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Abstract
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 ledger technology (DLT) in general. Instead of matching the buy and sell sides, automated market makers (AMMs) employ a peer-to-pool method and determine asset price algorithmically through a so-called conservation function. To facilitate the improvement and development of automated market maker (AMM)-based decentralized exchanges (DEXs), we create the first systematization of knowledge in this area. We first establish a general automated market maker (AMM) framework describing the economics and formalizing the system’s state-space representation. We then employ our framework to systematically compare the top automated market maker (AMM) protocols’ mechanics, illustrating their conservation functions, as well as slippage and divergence loss functions. We further discuss security and privacy concerns, how they are enabled by automated market maker (AMM)-based decentralized exchanges (DEXs)’ inherent properties, and explore mitigating solutions. Finally, we conduct a comprehensive literature review on related work covering both decentralized finance (DeFi) and conventional market microstructure.
| Type: | Article |
|---|---|
| Title: | SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1145/3570639 |
| Publisher version: | http://dx.doi.org/10.1145/3570639 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | decentralized finance, decentralized exchange, automated market maker, blockchain, Ethereum |
| 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 Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10161960 |
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