The suitability of using Uniswap V2 model to analyze V3 data

Nir Chemaya and Dingyue Liu

Finance Research Letters, 2024, vol. 59, issue C

Abstract: Decentralized exchanges’ popularity is rising, with liquidity pools widely used for trading. Uniswap V3, a newer version, offers advanced features, but it is more complex to analyze compared to V1 and V2. We compared a simple V2 model’s theoretical predictions with Uniswap V3 data. Surprisingly, the V2 model accurately predicted the V3 data in 97.1% of transactions, with a deviation of less than 0.1%. Accuracy was higher in active pools with substantial transaction volume and liquidity, while inactive pools performed less effectively. This approach aids researchers in assessing V2 model suitability for Uniswap V3 data analysis.

Keywords: Blockchain; Cryptocurrency; Decentralized exchanges; Decentralized finance; UniswapV2 & V3 (search for similar items in EconPapers)
JEL-codes: G10 G19 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323010899

DOI: 10.1016/j.frl.2023.104717

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