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SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols


  • Jiahua Xu
  • Krzysztof Paruch
  • Simon Cousaert
  • Yebo Feng


As an integral part of the decentralized finance (DeFi) ecosystem, decentralized exchanges (DEX) with automated market maker (AMM) protocols have gained massive traction with the recently revived interest in blockchain and distributed ledger technology (DLT) in general. Instead of matching the buy and sell sides, AMMs employ a peer-to-pool method and determine asset price algorithmically through a so-called conservation function. To facilitate the improvement and development of AMM-based DEX, we create the first systematization of knowledge in this area. We first establish a general AMM framework describing the economics and formalizing the system's state-space representation. We then employ our framework to systematically compare the top AMM protocols' mechanics, illustrating their conservation functions, as well as slippage and divergence loss functions. We further discuss security and privacy concerns, how they are enabled by AMM-based DEX's inherent properties, and explore mitigating solutions. Finally, we conduct a comprehensive literature review on related work covering both DeFi and conventional market microstructure.

Suggested Citation

  • Jiahua Xu & Krzysztof Paruch & Simon Cousaert & Yebo Feng, 2021. "SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols," Papers 2103.12732,, revised Jan 2022.
  • Handle: RePEc:arx:papers:2103.12732

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    References listed on IDEAS

    1. Chris Dai, 2020. "DEX: A DApp for the Decentralized Marketplace," Economics, Law, and Institutions in Asia Pacific, in: Makoto Yano & Chris Dai & Kenichi Masuda & Yoshio Kishimoto (ed.), Blockchain and Crypto Currency, chapter 0, pages 95-106, Springer.
    2. Daniel Perez & Sam M. Werner & Jiahua Xu & Benjamin Livshits, 2020. "Liquidations: DeFi on a Knife-edge," Papers 2009.13235,, revised Dec 2021.
    3. ., 2020. "Taxes for which state?," Chapters, in: Tax Tyranny, chapter 11, pages 163-176, Edward Elgar Publishing.
    4. Andreas Richardson & Jiahua Xu, 2020. "Carbon Trading with Blockchain," Springer Proceedings in Business and Economics, in: Panos Pardalos & Ilias Kotsireas & Yike Guo & William Knottenbelt (ed.), Mathematical Research for Blockchain Economy, pages 105-124, Springer.
    5. Alex Evans, 2020. "Liquidity Provider Returns in Geometric Mean Markets," Papers 2006.08806,, revised Jul 2020.
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    Cited by:

    1. Abrar Rahman & Victor Shi & Matthew Ding & Elliot Choi, 2022. "Systematization of Knowledge: Synthetic Assets, Derivatives, and On-Chain Portfolio Management," Papers 2209.09958,
    2. Simon Cousaert & Jiahua Xu & Toshiko Matsui, 2021. "SoK: Yield Aggregators in DeFi," Papers 2105.13891,, revised Mar 2022.

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