Dynamic Automated Market Makers for Decentralized Cryptocurrency Exchange
Bhaskar Krishnamachari, Qi Feng, Eugenio Grippo
Abstract
Decentralized cryptocurrency exchange protocols such as Uniswap, Curve and other types of Automated Market Makers (AMMs) maintain a liquidity pool (LP) of two or more assets constrained to maintain at all times a mathematical relation to each other, defined by a given function or curve. We propose a dynamic AMM approach where input from a market price oracle is used to modify the mathematical relationship between the assets so that the pool price continuously and automatically adjusts to be identical to the market price. This approach eliminates arbitrage opportunities.
Topics & Concepts
CryptocurrencyMarket liquidityOracleComputer scienceFunction (biology)ArbitrageRelation (database)EconometricsEconomicsComputer securityFinanceData miningSoftware engineeringBiologyEvolutionary biologyBlockchain Technology Applications and SecurityFinancial Markets and Investment StrategiesComplex Systems and Time Series Analysis