Paper 2024/1021

ammBoost: State Growth Control for AMMs

Abstract

Automated market makers (AMMs) are a form of decentralized cryptocurrency exchanges that have attracted huge interest lately. They are considered a prime example of Decentralized Finance (DeFi) applications, a large category under Web 3.0. Their popularity and high trading activity have resulted in millions of on-chain transactions leading to serious scalability issues in terms of throughput and on-chain state size. Existing scalability solutions, when employed in the context of AMMs, are either ineffective due to their large overhead, or suffer from security and centralization issues. In this paper, we address these challenges by utilizing a new sidechain architecture as a layer 2 solution, building a system called ammBoost. Our system reduces the amount of on-chain transactions, boosts throughput, and supports blockchain pruning. We devise several techniques to enable layer 2 processing while preserving the correct and secure operation of AMMs. These include a functionality-split and layer 2 traffic summarization paradigm, an epoch-based deposit mechanism, and pool snapshot-based and delayed token-payout trading. We also build a proof-of-concept of ammBoost for a Uniswap-inspired use case to empirically evaluate performance. Our experiments show that ammBoost decreases the gas cost by 96.05% and the chain growth by at least 93.42%, and that it can support up to 500x of the daily traffic volume observed for Uniswap in practice.