We investigate the most common type of blockchain-based decentralized exchange, which are known as constant function market makers (CFMMs). We examine the the market microstructure around CFMMs and present a model for valuing the liquidity provider (LP) mechanism and estimating the value of the associated derivatives. We develop a model with two types of traders that have different information and contribute methods for simulating the behavior of each trader and accounting for trade PnL. We also develop ideas around the equilibrium distribution of fair price conditional on the arrival of traders. Finally, we show how these findings might be used to think about parameters for alternative CFMMs.

翻译：我们研究了基于区块链的去中心化交易所中最常见的类型，即恒定函数做市商（CFMMs）。我们分析了围绕CFMMs的市场微观结构，并提出了一个模型，用于评估流动性提供者（LP）机制及其相关衍生品的价值。我们构建了一个包含两类信息不同的交易者的模型，并提供了模拟每类交易者行为以及核算交易盈亏（PnL）的方法。我们还发展了关于在交易者到达条件下公允价格均衡分布的理论。最后，我们展示了这些发现如何用于思考替代性CFMMs的参数设置。