Behavior of Liquidity Providers in Decentralized Exchanges

Wang, Ye; Heimbach, Lioba; Wattenhofer, Roger

doi:10.48550/arxiv.2105.13822

Cited by 3 publications

(2 citation statements)

References 7 publications

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“…In addition to providing increased security, DEXs offer greater user control and privacy because traders retain complete control and ownership over their assets throughout the transaction process. Prominent examples of DEXs include Uniswap, SushiSwap, and Curve [57,91].…”

Section: Decentralized Exchanges (Dexs)mentioning

confidence: 99%

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A Review on Decentralized Finance Ecosystems

Alamsyah,

Kusuma,

Ramadhani

2024

Future Internet

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The future of the internet is moving toward decentralization, with decentralized networks and blockchain technology playing essential roles in different sectors. Decentralized networks offer equality, accessibility, and security at a societal level, while blockchain technology guarantees security, authentication, and openness. Integrating blockchain technology with decentralized characteristics has become increasingly significant in finance; we call this “decentralized finance” (DeFi). As of January 2023, the DeFi crypto market capitalized USD 46.21 billion and served over 6.6 million users. As DeFi continues to outperform traditional finance (TradFi), it provides reduced fees, increased inclusivity, faster transactions, enhanced security, and improved accessibility, transparency, and programmability; it also eliminates intermediaries. For end users, DeFi presents asset custody options, peer-to-peer transactions, programmable control features, and innovative financial solutions. Despite its rapid growth in recent years, there is limited comprehensive research on mapping DeFi’s benefits and risks alongside its role as an enabling technology within the financial services sector. This research addresses these gaps by developing a DeFi classification system, organizing information, and clarifying connections among its various aspects. The research goal is to improve the understanding of DeFi in both academic and industrial circles to promote comprehension of DeFi taxonomy. This well-organized DeFi taxonomy aids experts, regulators, and decision-makers in making informed and strategic decisions, thereby fostering responsible integration into TradFi for effective risk management. This study enhances DeFi security by providing users with clear guidance on existing mechanisms and risks in DeFi, reducing susceptibility to misinformation, and promoting secure participation. Additionally, it offers an overview of DeFi’s role in shaping the future of the internet.

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Section: Decentralized Exchanges (Dexs)mentioning

confidence: 99%

“…AMMs, offering algorithm-based pricing for instant quotes despite liquidity pool depth, are projected to generate value across DeFi and TradFi. Future advancements are anticipated to further enhance efficiency over time [6,57,91].…”

Section: Decentralized Exchanges (Dexs)mentioning

confidence: 99%

A Review on Decentralized Finance Ecosystems

Alamsyah,

Kusuma,

Ramadhani

2024

Future Internet

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Decentralized Finance (DeFi)

Moro-Visconti,

Cesaretti

2023

Digital Token Valuation

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Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A systematic literature review

Hägele

2024

Electron Markets

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Research on cryptocurrency exchanges, consisting of both centralized exchanges (CEXs) and decentralized exchanges (DEXs), has seen a significant increase in contributions in recent years, driven by growing interest in the conceptual design of cryptocurrency markets. Through a comprehensive review of literature published between January 2019 and September 2023, I identify and analyze different dimensions of the ongoing CEX vs. DEX debate. While DEXs emphasize decentralization, user control, and resistance to censorship, CEXs offer higher liquidity, advanced trading features, and a more established track record. Regulatory challenges, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, also feature prominently in the literature and influence the choice of exchange for both traders and policymakers. In addition, I observe a growing interest in the design of pricing functions for CEXs and DEXs, particularly in the area of automated market makers (AMMs). Finally, based on my findings, I outline future research opportunities in this context and derive research gaps as well as recommended actions for practitioners.

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Behavior of Liquidity Providers in Decentralized Exchanges

Cited by 3 publications

References 7 publications

A Review on Decentralized Finance Ecosystems

A Review on Decentralized Finance Ecosystems

Decentralized Finance (DeFi)

Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A systematic literature review

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