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Quantitative Finance > Trading and Market Microstructure

arXiv:2309.12818 (q-fin)
[Submitted on 22 Sep 2023 (v1), last revised 28 Sep 2023 (this version, v2)]

Title:How Automated Market Makers Approach the Thin Market Problem in Cryptoeconomic Systems

Authors:Daniel Kirste, Niclas Kannengießer, Ricky Lamberty, Ali Sunyaev
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Abstract:The proper design of automated market makers (AMMs) is crucial to enable the continuous trading of assets represented as digital tokens on markets of cryptoeconomic systems. Improperly designed AMMs can make such markets suffer from the thin market problem (TMP), which can cause cryptoeconomic systems to fail their purposes. We developed an AMM taxonomy that showcases AMM design characteristics. Based on the AMM taxonomy, we devised AMM archetypes implementing principal solution approaches for the TMP. The main purpose of this article is to support practitioners and researchers in tackling the TMP through proper AMM designs.
Subjects: Trading and Market Microstructure (q-fin.TR); Cryptography and Security (cs.CR)
Cite as: arXiv:2309.12818 [q-fin.TR]
  (or arXiv:2309.12818v2 [q-fin.TR] for this version)
  https://doi.org/10.48550/arXiv.2309.12818

Submission history

From: Daniel Kirste [view email]
[v1] Fri, 22 Sep 2023 12:15:34 UTC (1,303 KB)
[v2] Thu, 28 Sep 2023 09:53:12 UTC (1,302 KB)
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