Design of a Decentralized Fixed-Income Lending Automated Market Maker Protocol Supporting Arbitrary Maturities

ArXiv ID: 2512.16080 “View on arXiv”

Authors: Tianyi Ma

Abstract

In decentralized finance (DeFi), designing fixed-income lending automated market makers (AMMs) is extremely challenging due to time-related complexities. Moreover, existing protocols only support single-maturity lending. Building upon the BondMM protocol, this paper argues that its mathematical invariants are sufficiently elegant to be generalized to arbitrary maturities. This paper thus propose an improved design, BondMM-A, which supports lending activities of any maturity. By integrating fixed-income instruments of varying maturities into a single smart contract, BondMM-A offers users and liquidity providers (LPs) greater operational freedom and capital efficiency. Experimental results show that BondMM-A performs excellently in terms of interest rate stability and financial robustness.

Keywords: Decentralized Finance (DeFi), Automated Market Makers (AMM), Fixed-Income Lending, Smart Contracts, Bond Maturation, Fixed Income (DeFi)

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Holy Grail
  • Why: The paper presents advanced mathematical derivations for extending the BondMM protocol to support arbitrary maturities, using invariants and differential equations. It includes experimental evaluation of performance metrics like interest rate stability and financial robustness, indicating empirical testing and data analysis.
  flowchart TD
    A["Research Goal:<br>Generalize BondMM to Support Arbitrary Maturities"] --> B["Methodology:<br>Formalize Mathematical Invariants"]
    B --> C["Input:<br>Fixed-Income AMM Theory"]
    C --> D["Computational Process:<br>Derive BondMM-A Protocol"]
    D --> E["Simulation:<br>Test Interest Rate Stability"]
    E --> F{"Key Outcome 1:<br>Stable Interest Rates?"}
    F -- Yes --> G["Simulation:<br>Test Financial Robustness"]
    F -- No --> H["Return to Derivation"]
    G --> I{"Key Outcome 2:<br>Robust?"}
    I -- Yes --> J["Final Outcome:<br>BondMM-A Design"]
    I -- No --> H