Centrala begrepp
The authors propose a novel Function Maximizing AMM design to eliminate arbitrage profits and sandwich attacks in decentralized finance.
Sammanfattning
The study introduces the FM-AMM design to address issues of arbitrage profits and sandwich attacks in decentralized finance. It compares the returns of providing liquidity on Uniswap v3 with the simulated FM-AMM across various token pairs. The paper highlights the importance of batch trading to prevent price manipulation and discusses implications for traditional finance.
The CFAMMs are criticized for trading at a loss during rebalancing events, leading to arbitrageurs exploiting liquidity providers. Sandwich attacks are also identified as a common issue in CFAMMs. The study proposes that an FM-AMM can eliminate these problems by processing trades in batches and using uniform prices.
Competition between arbitrageurs ensures that the batch always trades at equilibrium price, eliminating arbitrage profits and sandwich attacks. The paper empirically analyzes the return on providing liquidity to Uniswap v3 compared to the simulated FM-AMM for different token pairs.
The research suggests that an FM-AMM could be beneficial for traditional finance applications due to increased efficiency and security. It also discusses how fees impact trading strategies on the FM-AMM and emphasizes the importance of batching trades to maintain price consistency.
Statistik
"Between October 2022...approximately 1.2 billion USD"
"Currently, top three builders produce approximately 80% of blocks added to Ethereum blockchain"