Financial economics of automated market makers

Alexander Brauneis, Roland Mestel and Martin Rauch

Chapter 9 in The Elgar Companion to Decentralized Finance, Digital Assets, and Blockchain Technologies, 2024, pp 167-190 from Edward Elgar Publishing

Abstract: With the inception of Bitcoin in 2009 as the world’s first cryptocurrency, a new era of trustless, censorship resistant and decentralized transfer of assets has commenced. Smart contract capable blockchains like Ethereum allow for the creation of computer code which is stored on the blockchain. The code executes tasks in a transparent and immutable way, without central authorities or third party middlemen. Automated market maker (AMM) liquidity pools are a groundbreaking application built on top of smart contract blockchains, first introduced in late 2018. AMMs facilitate the non-custodial exchange of arbitrary assets that can be represented on a blockchain, or tokenized. This chapter sheds light on the operating principles of AMMs and highlights variants of AMMs and notions of liquidity provision, slippage, and impermanent loss.

Keywords: Business and Management; Economics and Finance; Innovations and Technology (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035307760.00014 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:22115_9

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().