Explore Automated Market Makers (AMMs), the underlying protocols used by decentralized exchanges (DEX) to allow users to perform trades of cryptocurrencies in a decentralized way with no middlemen. This book provides a thorough study and a clear-cut exposition of the principal AMMs (Uniswap v2 and v3, Balancer, and Curve).You'll receive a detailed description of how these AMMs work, unveiling the mathematics behind them and showing plenty of examples as well as novel proofs for several interesting facts. Each chapter describes an AMM's core idea and derives the mathematical formulas used in the code, giving careful explanations of the logical thinking involved and detailing the steps needed to reach those formulas. All these explanations are complemented with thoughtfully chosen examples which further help to enlighten the readers on how the formulae work. In addition, the relevant parts of the codes of the AMMs are shown after explaining each formula sothat the actual implementation of the formulae can be seen.In a traditional trading market a buy order has to be matched with a sell order to achieve a trade. However, for an AMM, users trade against the protocol itself, a smart contract, or a community pool of funds. In simple terms this is an open source computer program in which mathematical formulas define prices.aAutomated Market Makersaexamines this critical point revealing that no banks or intermediaries are necessary, giving crucial financial access to a much larger crowd, regardless of who they are with less barriers to access.What You'll LearnO Understand the principals of decentralized finance (DeFi)O Grasp mathematical formulae that underpin decentralized exchangesO Work with Solidity programming languageO Review current industry best practicesa Who This Book Is ForO Those new to Blockchain and Cryptocurrency trading, who want to learn more about AMMsO Developers who want to dive deeper into the core features of AMM platformsO Investors and venture capitalists who want to know more about new emerging technologies
Chapter 1: Introduction to Automated Market Makers 1.1. Introduction to Decentralized Finance (DeFi) 1.2. What is an Automated Market Maker (AMM) 1.3. Decentralized Exchanges (DEX) 1.4. Liquidity Pools Chapter 2: Uniswap v2 1.1 Introduction 1.2 Trading perspective 1.3 Providing liquidity 1.4 Optimal routing among DEX's Chapter 3: Balancer 2.1 The Constant Value Function 2.2 Spot price 2.3 Trading formulas 2.4 All-asset deposit 2.5 Single-asset deposit 2.6 All-asset withdrawal 2.7 Single-asset withdrawal 2.8 Pool tokens swap Chapter 4: Curve Finance 3.1 Introduction 3.2 Mathematical preliminaries 3.3 Trading formulas 3.4 All-asset deposit 3.5 All-asset withdrawal 3.6 Single-asset withdrawal 3.7 Curve LP token swap Chapter 5: Uniswap v3 4.1 Introduction 4.2 Ticks 4.3 Concentrated liquidity 4.4 LP position value 4.5 Impermanent loss 4.6 Position minting 4.7 Uniswap v3 position vs. short put options
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