Partially Active Automated Market Makers

Battle Count: 55

Highly relevant to quantitative trading in DeFi/DEX contexts. The paper directly addresses market making, adverse selection, and optimal execution in blockchain-based exchanges. The LVR framework is a core metric in DeFi quantitative research. The connection to optimal index tracking and execution literature (Almgren-Chriss, no-trading-zone policies) makes it relevant to traditional quantitative trading as well. The mechanism is implementable and has direct implications for LP strategy and DEX protocol design.

The PA-AMM mechanism itself is extremely simple to implement: partition reserves into active/passive at block start, trade only against active reserves. Algorithm 1 is straightforward smart contract logic. The theoretical analysis (stationary distributions, Bellman equations, Taylor expansions) is mathematically sophisticated but does not affect implementation. The main practical complexity lies in calibrating λ and handling edge cases (first interaction trigger, liquidity additions/removals).

The paper is fully theoretical with complete mathematical proofs (Appendix A). The mechanism is described via pseudocode (Algorithm 1). Simulations use historical ETH price data (May-Oct 2025) but no code repository is provided. The analytical results (Propositions, Corollaries, Theorem) are self-contained and verifiable. However, reproduction of numerical simulations would require the author's code.