Arbitrageurs' profits, LVR, and sandwich attacks: batch trading as an AMM design response
CoRR(2023)
摘要
We study a novel automated market maker design: the function maximizing AMM
(FM-AMM). Our central assumption is that trades are batched before execution.
Because of competition between arbitrageurs, the FM-AMM eliminates arbitrage
profits (or LVR) and sandwich attacks, currently the two main problems in
decentralized finance and blockchain design more broadly. We then consider 11
token pairs and use Binance price data to simulate the lower bound to the
return of providing liquidity to an FM-AMM. Such a lower bound is, for the most
part, slightly higher than the empirical returns of providing liquidity on
Uniswap v3 (currently the dominant AMM).
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