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Systematization of knowledge: constant function market makers

In: The Elgar Companion to Decentralized Finance, Digital Assets, and Blockchain Technologies

Author

Listed:
  • Michele Fabi
  • Myriam Kassoul
  • Julien Prat

Abstract

We provide an overview of the academic literature on Automated Market Makers for Decentralized Exchanges. Our review puts an emphasis on contributions from researchers in economics and finance. We cover papers that study the optimal design of Automated Market Makers. Then we discuss models that leverage the insights from the literature on two-sided markets to characterize the equilibrium size of liquidity pools and the incentives of liquidity providers. Finally, we review recent research on the interactions between Miner Extractible Value and Decentralized Exchanges.

Suggested Citation

  • Michele Fabi & Myriam Kassoul & Julien Prat, 2024. "Systematization of knowledge: constant function market makers," Chapters, in: Henrik Cronqvist & Desiree-Jessica Pely (ed.), The Elgar Companion to Decentralized Finance, Digital Assets, and Blockchain Technologies, chapter 10, pages 191-216, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22115_10
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035307760.00015
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