SAMM: Sharded Automated Market Maker (2406.05568v4)

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 earn 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 ``hot-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.