Silkswap: An asymmetric automated market maker model for stablecoins

Paper: arXiv 2302.07822

Authors: Nicola Cantarutti, Alex Harker, Carter Woetzel

Abstract

Silkswap is an automated market maker model designed for efficient stablecoin trading with minimal price impact. The original purpose of Silkswap is to facilitate the trading of fiat-pegged stablecoins with the stablecoin Silk, but it can be applied to any pair of stablecoins. The Silkswap invariant is a hybrid function that generates an asymmetric price impact curve. We present the derivation of the Silkswap model and its mathematical properties. We also compare different numerical methods used to solve the invariant equation. Finally, we compare our model with the well-known Curve Finance model.

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 3.5/10
• Quadrant: Lab Rats — theoretically deep, empirically untested

Why this score: The paper presents a solid mathematical formulation of an asymmetric hybrid AMM invariant alongside numerical solution methods. While mathematically clear and conceptually novel for stablecoin pools, it lacks robust empirical testing and historical trade data validation.

Research Flowchart

  flowchart TD
    A["Research Goal: Design efficient AMM for stablecoin trading (Silkswap)"] --> B["Inputs: Fiat-pegged stablecoins & Silk token reserve data"]
    B --> C["Methodology: Derive hybrid invariant function for asymmetric price impact"]
    C --> D["Computation: Evaluate & compare numerical methods to solve invariant"]
    C --> E["Computation: Perform comparative analysis against Curve Finance model"]
    D --> F["Outcomes: Silkswap achieves minimal price impact with optimized solver"]
    E --> F