This repository has all the workings of the Primitive research for Replicating Market Makers. This work is primarily managed by Primitives Head of Research 0xEstelle, and 0xJepsen. Because we believe in public open source work, we intend to upload all work to this repository. Please use this repository for the most up to date versions of our work.
Here are the abstracts of the papers we finished
Constant function market makers (CFMMs) have evolved from a small group of decentralized exchanges (DEXs) to a broad and largely undiscovered class of automated market makers (AMMs). CFMMs are decentralized exchanges fully backed by a community of liquidity providers seeking to earn a yield on their deposited assets. The portfolio of a liquidity provider follows a payoff structure specific to the CFMM they are providing liquidity too. It was recently shown that the space of concave, non-negative, non-decreasing, 1-homogeneous payoff functions and the space of convex CFMMs are equivalent, along with a method to convert between a given payoff of the above type with an associated CFMM. These CFMMs, which replicate specific, desired payoff functions, are called replicating market makers (RMMs). In this paper, we present an implementation of an RMM that approximates a Black--Scholes covered call, which we call RMM-01.
The current design space of derivatives in Decentralized Finance (DeFi) relies heav- ily on oracle systems. Replicating market makers (RMMs) provide a mechanism for converting specific payoff functions to an associated Constant Function Market Makers (CFMMs). We leverage RMMs to replicate the approximate payoff of a Black-Scholes covered call option. RMM-01 is the first implementation of an on-chain expiring option mechanism that relies on arbitrage rather than an external oracle for price. We pro- vide frameworks for derivative instruments and structured products achievable on-chain without relying on oracles. We construct long and binary options and briefly discuss perpetual covered call strategies commonly referred to as "theta vaults". Moreover, we introduce a procedure to eliminate liquidation risk in lending markets. The results suggest that CFMMs are essential for structured product design with minimized trust dependencies.
Contains simulation-based testing on RMM-01 pool performance as well as any RMM-01 based structured products
An application of Topological Data Analysis (TDA) on analyzing user activity and digesting RMM data
This repository is for transaction data analysis on the the Arbitrum Network