Srisht Fateh Singh, Panagiotis Michalopoulos, Andreas Veneris
{"title":"Deeper: A shared liquidity decentralized exchange design for low trading volume tokens to enhance average liquidity","authors":"Srisht Fateh Singh, Panagiotis Michalopoulos, Andreas Veneris","doi":"10.1002/nem.2261","DOIUrl":null,"url":null,"abstract":"<p>This paper presents <span>Deeper</span>, a design for a decentralized exchange that enhances liquidity via reserve sharing. By doing this, it addresses the problem of shallow liquidity in low trading volume token pairs. Shallow liquidity impairs the functioning of on-chain markets by creating room for unwanted phenomena such as high slippage and sandwich attacks. <span>Deeper</span> solves this by allowing liquidity providers of multiple trading pairs against a common token to share liquidity. This is achieved by creating a common reserve pool for the shared token that is accessible by each trading pair. Independent from the shared liquidity, providers are free to add liquidity to individual token pairs without any restriction. The trading between one token pair does not affect the price of other token pairs even though the reserve of the shared token changes. The proposed design is an extension of concentrated liquidity automated market maker DEXs that is simple enough to be implemented on smart contracts. This is demonstrated by providing a template for a hook-based smart contract that adds our custom functionality to <span>Uniswap V4</span>. Experiments on historical prices show that for a batch consisting of eight trading pairs, <span>Deeper</span> enhances liquidity by over 2.6–\n<span></span><math>\n <mn>5</mn>\n <mo>.</mo>\n <mn>9</mn>\n <mo>×</mo></math>. The enhancement in liquidity can be increased further by increasing the participating tokens in the shared pool. While providing shared liquidity, liquidity providers should be cautious of certain risks and pitfalls, which are described. Overall, <span>Deeper</span> enables the creation of fair markets for low trading volume token pairs.</p>","PeriodicalId":14154,"journal":{"name":"International Journal of Network Management","volume":"34 4","pages":""},"PeriodicalIF":1.5000,"publicationDate":"2024-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/nem.2261","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Network Management","FirstCategoryId":"94","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/nem.2261","RegionNum":4,"RegionCategory":"计算机科学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"COMPUTER SCIENCE, INFORMATION SYSTEMS","Score":null,"Total":0}
引用次数: 0
Abstract
This paper presents Deeper, a design for a decentralized exchange that enhances liquidity via reserve sharing. By doing this, it addresses the problem of shallow liquidity in low trading volume token pairs. Shallow liquidity impairs the functioning of on-chain markets by creating room for unwanted phenomena such as high slippage and sandwich attacks. Deeper solves this by allowing liquidity providers of multiple trading pairs against a common token to share liquidity. This is achieved by creating a common reserve pool for the shared token that is accessible by each trading pair. Independent from the shared liquidity, providers are free to add liquidity to individual token pairs without any restriction. The trading between one token pair does not affect the price of other token pairs even though the reserve of the shared token changes. The proposed design is an extension of concentrated liquidity automated market maker DEXs that is simple enough to be implemented on smart contracts. This is demonstrated by providing a template for a hook-based smart contract that adds our custom functionality to Uniswap V4. Experiments on historical prices show that for a batch consisting of eight trading pairs, Deeper enhances liquidity by over 2.6–
. The enhancement in liquidity can be increased further by increasing the participating tokens in the shared pool. While providing shared liquidity, liquidity providers should be cautious of certain risks and pitfalls, which are described. Overall, Deeper enables the creation of fair markets for low trading volume token pairs.
期刊介绍：
Modern computer networks and communication systems are increasing in size, scope, and heterogeneity. The promise of a single end-to-end technology has not been realized and likely never will occur. The decreasing cost of bandwidth is increasing the possible applications of computer networks and communication systems to entirely new domains. Problems in integrating heterogeneous wired and wireless technologies, ensuring security and quality of service, and reliably operating large-scale systems including the inclusion of cloud computing have all emerged as important topics. The one constant is the need for network management. Challenges in network management have never been greater than they are today. The International Journal of Network Management is the forum for researchers, developers, and practitioners in network management to present their work to an international audience. The journal is dedicated to the dissemination of information, which will enable improved management, operation, and maintenance of computer networks and communication systems. The journal is peer reviewed and publishes original papers (both theoretical and experimental) by leading researchers, practitioners, and consultants from universities, research laboratories, and companies around the world. Issues with thematic or guest-edited special topics typically occur several times per year. Topic areas for the journal are largely defined by the taxonomy for network and service management developed by IFIP WG6.6, together with IEEE-CNOM, the IRTF-NMRG and the Emanics Network of Excellence.
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