Our work “CLVR Ordering of Transactions on AMMs” allows a “social planner” to construct an ordering of trades that approximately minimizes price volatility with a low computational cost.
A financial market valued over $1T, referred to as Decentralized Finance (“DeFi”), has surfaced in the past decade, exhibiting completely different characteristics than traditional markets: (i) settlement and price update are transparent and immediate, and (ii) the market platform itself can batch and (re)order trades.
💡 Suppose that a “social planner” could set rules that benefit global welfare and provide financial protection in DeFi, what would planning look like?
🔀 Instead of trying, like many, to prevent extracted value (“MEV”) 🤖, or to enforce first-come-first-serve ordering 🎟 , for fairness sake, we provide a simple algorithm, Clever Look-ahead Volatility Reduction (CLVR). The CLVR algorithm constructs an ordering which approximately minimizes price volatility with a low computational cost.
w/ Nir Chemaya, Dingyue (Kite) Liu, Robert McLaughlin
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Stay tuned for more coming out of the [Foundations of Financial Technology (“FifTech”)] at UC Santa Barbara.
