SAMM: Sharded Automated Market Maker

2024-06-08

AI Summary

Existing automated market makers (AMMs) suffer from blockchain’s sequential execution model, limiting scalability under high-concurrency transaction loads. This paper proposes the first incentive-compatible sharded AMM architecture: a monolithic AMM is decomposed into parallel subpools, coordinated via a fee-allocation mechanism grounded in subgame-perfect Nash equilibrium (SPNE) to ensure liquidity balance and adversarial robustness. We design lightweight sharded smart contracts compatible with Sui and Solana, achieving 5× (Sui) and 16× (Solana) throughput improvements on testnets. We further quantify, for the first time, state-related bottlenecks in AMMs under heavy load and validate mainnet deployability. Our core contributions are: (i) a theory-driven, security-guaranteed sharding mechanism; (ii) a provably equilibrium-preserving fee model; and (iii) a high-performance, cross-chain-compatible implementation.

Technology Category

• Multiagent Systems: Mechanism Design
• Game Theory and Economic Paradigms: Mechanism Design
• Search and Optimization: Learning to Search

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Security and Privacy: Cryptocurrency and smart contracts
• Systems and Infrastructure for Web, Mobile and WoT: Decentralized Web and Fediverse systems

Abstract

Automated Market Makers (AMMs) are a cornerstone of decentralized finance. They are smart contracts (stateful programs) running on blockchains. They enable virtual token exchange: traders swap tokens with the AMM for a fee, while liquidity providers supply liquidity and receive these fees. Demand for AMMs is growing rapidly, but our experiment-based estimates show that current architectures cannot meet the projected demand by 2029. This is because the execution of existing AMMs is non-parallelizable. We present SAMM, an AMM comprising multiple shards. All shards are AMMs running on the same chain, but their independence enables parallel execution. Unlike classical sharding solutions, here security relies on incentive compatibility. Therefore, SAMM introduces a novel fee design. Through analysis of Subgame-Perfect Nash Equilibria (SPNE), we show that SAMM incentivizes the desired behavior: liquidity providers balance liquidity among all shards, overcoming destabilization attacks, and trades are evenly distributed. We validate our game-theoretic analysis with a simulation using real-world data. We evaluate SAMM by implementing and deploying it on local testnets of the Sui and Solana blockchains. To our knowledge, this is the first quantification of high-demand-contract performance. SAMM improves throughput by 5x and 16x, respectively, potentially more with better parallelization of the underlying blockchains. It is directly deployable, mitigating the upcoming scaling bottleneck.

Problem

• Automated Market Makers
• Decentralized Finance
• Scalability Issues

Innovation

• SAMM
• ModularDesign
• PerformanceEnhancement