Key Takeaways
Automated market makers, first popularized by Hanson’s logarithmic market scoring rule (or LMSR) for prediction markets, have become important building blocks for DeFi.
A particularly useful primitive is the ability to measure the price of an asset, a problem often known as the pricing oracle problem.
We give sufficient conditions such that, under fairly general assumptions, agents who interact with these constant function market makers are incentivized to correctly report the price of an asset and that they can do so in a computationally efficient way.
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