Key Takeaways
Constant function market makers (CFMMs) are popular mechanisms for trading of digital assets. However, they have notable drawbacks relative to conventional limit order books common to equity markets.
Empirical evidence suggests that when decentralized systems lose liveness, CFMMs are preferred to order books by liquidity providers.
This paper provides a theoretical underpinning for when one should prefer a CFMM to an order book. Results demonstrate that application-level liveness interacts with consensus liveness in a non-trivial manner.
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