SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols

Understand

As an integral part of the decentralized finance (DeFi) ecosystem, decentralized exchanges (DEXs) with automated market maker (AMM) protocols have gained massive traction with the recently revived interest in blockchain and distributed ledger technology (DLT) in general.

• Instead of matching the buy and sell sides, automated market makers (AMMs) employ a peer-to-pool method and determine asset price algorithmically through a so-called conservation function.
• To facilitate the improvement and development of automated market maker (AMM)-based decentralized exchanges (DEXs), we create the first systematization of knowledge in this area.
• We first establish a general automated market maker (AMM) framework describing the economics and formalizing the system's state-space representation.