QubitSwap: The Informational Edge in Decentralised Exchanges

ArXiv ID: 2504.06281 “View on arXiv”

Authors: Unknown

Abstract

Decentralised exchanges (DEXs) have transformed trading by enabling trustless, permissionless transactions, yet they face significant challenges such as impermanent loss and slippage, which undermine profitability for liquidity providers and traders. In this paper, we introduce QubitSwap, an innovative DEX model designed to tackle these issues through a hybrid approach that integrates an external oracle price with internal pool dynamics. This is achieved via a parameter $z$, which governs the balance between these price sources, creating a flexible and adaptive pricing mechanism. Through rigorous mathematical analysis, we derive a novel reserve function and pricing model that substantially reduces impermanent loss and slippage compared to traditional DEX frameworks. Notably, our results show that as $z$ approaches 1, slippage approaches zero, enhancing trading stability. QubitSwap marks a novel approach in DEX design, delivering a more efficient and resilient platform. This work not only advances the theoretical foundations of decentralised finance but also provides actionable solutions for the broader DeFi ecosystem.

Keywords: Decentralized Exchange (DEX), Impermanent loss, Slippage, Oracle price, Automated Market Maker (AMM), Cryptocurrency (DeFi)

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 2.0/10
  • Quadrant: Lab Rats
  • Why: The paper presents a novel mathematical model with differential equation solving, Taylor expansions, and analytical derivations for reserve functions and slippage, indicating high math complexity. However, it lacks any backtesting, code, or empirical data, relying solely on theoretical analysis and illustrative graphs without real-world implementation details.
  flowchart TD
    A["Research Goal<br>Reduce Impermanent Loss & Slippage in DEXs"] --> B["Key Methodology<br>Hybrid Oracle-Pool Model"]
    B --> C["Input: Oracle Price &<br>Internal Pool Reserves"]
    C --> D["Compute: Adaptive<br>Parameter z"]
    D --> E["Mathematical Modeling<br>Novel Reserve Function"]
    E --> F["Key Finding 1<br>Slippage → 0 as z → 1"]
    E --> G["Key Finding 2<br>Reduced Impermanent Loss"]