大阪大学　数理・データ科学教育研究センター
Center for Mathematical Modeling and Data Science,Osaka University

Strategic Bonding Curves in Automated Market Makers

Fayçal Drissi (University of Oxford)

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4. Strategic Bonding Curves in Automated Market Makers

大阪大学 数理・データ科学セミナー 金融・保険セミナーシリーズ 第148回

Strategic Bonding Curves in Automated Market Makers

Fayçal Drissi (University of Oxford)

The bonding curves of decentralised exchanges (DEXs) define, with mathematical formulae, the relationship between liquidity supply and prices. Most DEXs use the bonding curves of constant function markets (CFMs) to clear the supply and demand of liquidity. At present, liquidity providers (LPs) operate at a loss in CFMs, on average. We generalise CFMs and introduce decentralised liquidity pools (DLPs) which provide LPs with the tools to design dynamic bonding curves according to strategic preferences. In DLPs, impact functions encode how orders affect prices and quote functions determine the price of liquidity. To illustrate the strategic flexibility of DLPs, we develop models for bonding curves when prices form across multiple venues, within the DLP, or in a competing venue. In fragmented markets, the DLP estimates the fundamental price from the trading flow to adjust the bonding curve and reduce arbitrage losses. Our models may be used as hooks in Uniswap v4 when the DLP’s impact functions are those implied by the constant product function.