An overview of On-Chain Market Maker Strategy and Business
Author: Boo Canoe Founder His twitter https://twitter.com/0x_jem Abstract In this paper, we provide an overview of the on-chain market maker business and introduce the on-chain strategy through mathematical and engineering perspectives. In contrast to traditional market makers on centralized finance platforms, the on-chain market maker business significantly differs in terms of fund size, PnL function, volatility modeling, derivative strategy, and arbitrage. Finally, we propose some effective suggestions for new on-chain market makers. 1 Introduction Enables market makers to seamlessly flow into DeFi liquidity. The recent collapse of Alamend Research and FTX highlights the power of decentralization philosophy in the DEX and DeFi space. However, it’s worth noting that the liquidity size is still largely controlled by CEX. To shift the balance of price power towards DEX from CEX, we need to focus on building infrastructure for traditional market makers, which would support an “on-chain ...