An Economic Model of a Decentralized Exchange with Concentrated Liquidity

• 成果类型: Article; Early Access
• 署名作者: Hasbrouck, Joel; Rivera, Thomas J.; Saleh, Fahad
• 署名单位: New York University; McGill University; State University System of Florida; University of Florida
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.04510
• 发表日期: 2025
• 关键词: decentralized exchange; automated market maker; concentrated liquidity; uniswap v3

摘要

We develop an economic model of a decentralized exchange with concentrated liquidity (e.g., Uniswap v3 and v4), with a particular focus on the economics of liquidity provision. We demonstrate that providing liquidity for a risky/risk-free asset pool is comparable to investing in a covered call, except that the call option therein is sold at intrinsic rather than market value. Hence, when providing liquidity, liquidity providers forgo the time premium of the call option in exchange for fees, and thus equilibrium liquidity provision decreases in the time premium. Finally, we provide an expression for equilibrium liquidity provision that is useful for empirical work.