Agent-Based Modeling of Blockchain Decentralized Financial Protocols

Abstract

Decentralized financial applications running on blockchains using smart contracts have attracted a lot of attention recently. One important class of such applications is decentralized digital asset exchanges. In this paper we present an agent-based modeling approach for decentralized exchanges that allowed us to achieve realistic results both in normal and stress market conditions and also investigate the impact of front runners on the distribution of profits. We also compare the results of the two exchanges - Uniswap and Liquifi - to evaluate the effect of the proposed solution for the price slippage and front running problems.