Problem Statement

Decentralized markets, exemplified by platforms like Uniswap and OpenSea, are pivotal applications of permissionless blockchains. These platforms harness the power of decentralization to enable many pseudonymous agents to engage in secure transactions. Our RFP seeks to delve into one or more of the following inquiries:

Investigate innovative designs for decentralized platform economies. What constitutes an optimal design for such a platform, and what are its primary objectives?
Analyze the design paradigms of decentralized versus centralized platforms, highlighting implementation hurdles and trade-offs.
Examine the security challenges inherent in decentralized platform design and propose countermeasures to strategic manipulation, such as Miner Extractable Value (MEV).
With the advancement of AI, many platforms may interact with sophisticated autonomous agents. How can we verify whether the outcomes produced by these platforms are equitable and adhere to the intended specifications?

Background

Market mechanisms play a crucial role in contemporary economies by facilitating resource allocation, enabling price discovery, aggregating information, and fostering innovation. Decentralization offers transparency, accessibility, interoperability, and automation. Trading venues like Uniswap are a testament to the robust adoption of decentralized markets, as evidenced by their substantial trading volumes. This RFP's primary objective is to investigate the architecture of decentralized platforms, including Automated Market Makers (AMMs). We also welcome explorations into other applications such as supply chain management, file storage (e.g., Filecoin), network sharing (e.g., Helium), and revenue sharing within cooperatives (e.g., DAOs). Below is a non-exhaustive list of potential research questions pertinent to this RFP.

Consider AMMs, which have gained significant traction on permissionless blockchains yet present ample scope for enhancement. AMMs are trading venues where liquidity providers (LPs) serve as counterparties to traders. Determining the optimal compensation for LPs remains a hot topic in research. The open participation model of AMMs facilitates token swapping and price discovery. However, challenges persist in preventing trading manipulation, commonly known as MEV, and ensuring trader security on par with centralized exchanges.

Another prevalent design in decentralized exchanges is batch auctions, which differ from AMMs in that all transactions are executed at a uniform price rather than sequentially at varying prices. This model offers numerous advantages, such as eliminating the potential for manipulation associated with transaction sequencing in AMMs. Despite their intuitive appeal as safer trading environments, batch auctions have seen limited adoption compared to AMMs. We seek to understand the factors that hinder liquidity attraction to these platforms.

Although most trading in Automated Market Makers (AMMs) occurs on thousands of two-token liquidity pools, their design enables a straightforward extension to accommodate an n-token pool (see Balancer). This capability raises an intriguing question: can we automatically combine liquidity pools to enhance trading execution?
Understanding the tradeoffs between two-token and multi-token pools remains an open area of exploration. While the fair ordering of transactions in two-token pools is better comprehended (see [\ref{4}]), determining the optimal sequence for executing transactions in multi-token pools is still an unresolved challenge.
Exploring the potential benefits and drawbacks of combining liquidity pools and the implications of multi-token pool transaction sequencing could lead to significant advancements in AMM design and trading efficiency.

Novel Designs for Decentralized Markets

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