Excited to release a new paper with @davidecrapis! We present a game theoretic model of simultaneous liquidity provision by passive LPs. We show that competition between liquidity providers causes a loss in total LP welfare that grows linearly with the number of passive LPs.

This paper shows the cost of permissionless liquidity provision in AMMs, check the full thread here 😀

An interesting research direction would be to analyze the equilibria that emerge when agents make decisions sequentially (Stackelberg games).

Thanks for the suggestion, definitely something we will look into. Different but related. The authors of this paper use a sequential model to model the adverse selection costs of JIT LPs on passive LPs

I tried to study concave pro-rata games, and I conjectured that the welfare was around O(2^N/N) (or something like that I do not remember XD), but I wasnt able to prove it! I will read the paper thanks!:)

Thanks for the suggestion, definitely something we will look into. Different but related. The authors of this paper use a sequential model to model the adverse selection costs of JIT LPs on passive LPs https://arxiv.org/abs/2311.18164