Automated Market Making (AMM) is used in decentralized exchanges (e.g. balancer, gnosis) to replace the order book/book making through an algorithm. From an algorithmic point of view AMMs are multi-input functions. Little is known about the behavior of the functions with regard to practical questions including
- how much initial and/or continious liquidity is needed?
- how many users/transactions are needed to have a cash-positive AMM?
- what are the threshold parameteres to avoid impernant loss?
- what parameters impact the slippage?
With all these questions in mind we implemented a simulator that allows to study the behavior of AMMs.
Constant-Price Market Maker (CPMM)
For a thorough analysis on the behavior, please refer to the paper