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The suitability of using Uniswap V2 model to analyze V3 data

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  • Chemaya, Nir
  • Liu, Dingyue

Abstract

Decentralized exchanges’ popularity is rising, with liquidity pools widely used for trading. Uniswap V3, a newer version, offers advanced features, but it is more complex to analyze compared to V1 and V2. We compared a simple V2 model’s theoretical predictions with Uniswap V3 data. Surprisingly, the V2 model accurately predicted the V3 data in 97.1% of transactions, with a deviation of less than 0.1%. Accuracy was higher in active pools with substantial transaction volume and liquidity, while inactive pools performed less effectively. This approach aids researchers in assessing V2 model suitability for Uniswap V3 data analysis.

Suggested Citation

  • Chemaya, Nir & Liu, Dingyue, 2024. "The suitability of using Uniswap V2 model to analyze V3 data," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323010899
    DOI: 10.1016/j.frl.2023.104717
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    References listed on IDEAS

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    1. John M. Abowd & Ian M. Schmutte, 2019. "An Economic Analysis of Privacy Protection and Statistical Accuracy as Social Choices," American Economic Review, American Economic Association, vol. 109(1), pages 171-202, January.
    2. Agostino Capponi & Ruizhe Jia, 2021. "The Adoption of Blockchain-based Decentralized Exchanges," Papers 2103.08842, arXiv.org, revised Jul 2021.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Blockchain; Cryptocurrency; Decentralized exchanges; Decentralized finance; UniswapV2 & V3;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other

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