Cryptocurrency (DeFi)

A Line Graph-Based Framework for Identifying Optimal Routing Paths in Decentralized Exchanges ArXiv ID: 2504.15809 “View on arXiv” Authors: Unknown Abstract Decentralized exchanges, such as those employing constant product market makers (CPMMs) like Uniswap V2, play a crucial role in the blockchain ecosystem by enabling peer-to-peer token swaps without intermediaries. Despite the increasing volume of transactions, there remains limited research on identifying optimal trading paths across multiple DEXs. This paper presents a novel line-graph-based algorithm (LG) designed to efficiently discover profitable trading routes within DEX environments. We benchmark LG against the widely adopted Depth-First Search (DFS) algorithm under a linear routing scenario, encompassing platforms such as Uniswap, SushiSwap, and PancakeSwap. Experimental results demonstrate that LG consistently identifies trading paths that are as profitable as, or more profitable than, those found by DFS, while incurring comparable gas costs. Evaluations on Uniswap V2 token graphs across two temporal snapshots further validate LG’s performance. Although LG exhibits exponential runtime growth with respect to graph size in empirical tests, it remains viable for practical, real-world use cases. Our findings underscore the potential of the LG algorithm for industrial adoption, offering tangible benefits to traders and market participants in the DeFi space. ...

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. ...

Closed-form solutions for generic N-token AMM arbitrage ArXiv ID: 2402.06731 “View on arXiv” Authors: Unknown Abstract Convex optimisation has provided a mechanism to determine arbitrage trades on automated market markets (AMMs) since almost their inception. Here we outline generic closed-form solutions for $N$-token geometric mean market maker pool arbitrage, that in simulation (with synthetic and historic data) provide better arbitrage opportunities than convex optimisers and is able to capitalise on those opportunities sooner. Furthermore, the intrinsic parallelism of the proposed approach (unlike convex optimisation) offers the ability to scale on GPUs, opening up a new approach to AMM modelling by offering an alternative to numerical-solver-based methods. The lower computational cost of running this new mechanism can also enable on-chain arbitrage bots for multi-asset pools. ...

Blockchain scaling and liquidity concentration on decentralized exchanges ArXiv ID: 2306.17742 “View on arXiv” Authors: Unknown Abstract Liquidity providers (LPs) on decentralized exchanges (DEXs) can protect themselves from adverse selection risk by updating their positions more frequently. However, repositioning is costly, because LPs have to pay gas fees for each update. We analyze the causal relation between repositioning and liquidity concentration around the market price, using the entry of blockchain scaling solutions, Arbitrum and Polygon, as our instruments. Lower gas fees on scaling solutions allow LPs to update more frequently than on Ethereum. Our results demonstrate that higher repositioning intensity and precision lead to greater liquidity concentration, which benefits small trades by reducing their slippage. ...