Axioms for Constant Function Market Makers

09/30/2022

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by   Jan Christoph Schlegel, et al.

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ETH Zurich

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We study axiomatic foundations for different classes of constant function automated market makers (CFMMs). We focus particularly on separability and homogeneity properties and give axiomatic characterizations of a natural generalization of constant product market makers (CPMMs). Moreover, we characterize the CPMM as an extremal point within the class of homogenuous, independent, symmetric AMMs with non-concentrated liquidity provision. Our results add to a formal analysis of mechanisms that are currently used for decentralized exchanges and introduce new tools to the topic.