Axioms for Automated Market Makers: A Mathematical Framework in FinTech and Decentralized Finance

Within this work we consider an axiomatic framework for Automated Market Makers (AMMs). AMMs are smart contracts that set prices for swaps on a pool of assets. By imposing reasonable axioms on the underlying utility function, we are able to characterize the properties of the swap size of the assets and of the resulting pricing oracle. In providing these general axioms, we define a novel measure of price impacts that can be used to quantify those costs between different AMM constructions. We have...