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An analysis of Uniswap markets

Author

Listed:
  • Guillermo Angeris
  • Hsien-Tang Kao
  • Rei Chiang
  • Charlie Noyes
  • Tarun Chitra

Abstract

Uniswap -- and other constant product markets -- appear to work well in practice despite their simplicity. In this paper, we give a simple formal analysis of constant product markets and their generalizations, showing that, under some common conditions, these markets must closely track the reference market price. We also show that Uniswap satisfies many other desirable properties and numerically demonstrate, via a large-scale agent-based simulation, that Uniswap is stable under a wide range of market conditions.

Suggested Citation

  • Guillermo Angeris & Hsien-Tang Kao & Rei Chiang & Charlie Noyes & Tarun Chitra, 2019. "An analysis of Uniswap markets," Papers 1911.03380, arXiv.org, revised Feb 2021.
    • Handle: RePEc:arx:papers:1911.03380
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    Citations

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    Cited by:

    1. Vijay Mohan, 2022. "Automated market makers and decentralized exchanges: a DeFi primer," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-48, December.
    2. Guillermo Angeris & Akshay Agrawal & Alex Evans & Tarun Chitra & Stephen Boyd, 2021. "Constant Function Market Makers: Multi-Asset Trades via Convex Optimization," Papers 2107.12484, arXiv.org.
    3. Lyudmila Kovalchuk & Volodymyr Kostanda & Oleksandr Marukhnenko & Nataliia Kuchynska & Yuliia Marchuk, 2023. "The Method of Choosing Parameters for Margin Trading Protocols in the Constant Product Model," Mathematics, MDPI, vol. 11(19), pages 1-20, October.
    4. Guillermo Angeris & Alex Evans & Tarun Chitra, 2023. "Replicating market makers," Digital Finance, Springer, vol. 5(2), pages 367-387, June.
    5. Erhan Bayraktar & Asaf Cohen & April Nellis, 2024. "DEX Specs: A Mean Field Approach to DeFi Currency Exchanges," Papers 2404.09090, arXiv.org.
    6. C. Escudero & F. Lara & M. Sama, 2024. "Optimal Trade Characterizations in Multi-Asset Crypto-Financial Markets," Papers 2405.06854, arXiv.org.
    7. Vidal-Tomás, David, 2023. "The illusion of the metaverse and meta-economy," International Review of Financial Analysis, Elsevier, vol. 86(C).
    8. Daniel Kirste & Niclas Kannengie{ss}er & Ricky Lamberty & Ali Sunyaev, 2023. "How Automated Market Makers Approach the Thin Market Problem in Cryptoeconomic Systems," Papers 2309.12818, arXiv.org, revised Sep 2023.
    9. Marcello Monga, 2024. "Automated Market Making and Decentralized Finance," Papers 2407.16885, arXiv.org.
    10. Guillermo Angeris & Alex Evans & Tarun Chitra, 2021. "Replicating Monotonic Payoffs Without Oracles," Papers 2111.13740, arXiv.org.
    11. Robin Fritsch & Andrea Canidio, 2024. "Measuring Arbitrage Losses and Profitability of AMM Liquidity," Papers 2404.05803, arXiv.org, revised Apr 2024.
    12. Agostino Capponi & Ruizhe Jia, 2021. "The Adoption of Blockchain-based Decentralized Exchanges," Papers 2103.08842, arXiv.org, revised Jul 2021.

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