A Note on Privacy in Constant Function Market Makers
This addresses privacy concerns for users of decentralized exchanges on blockchains, but it is incremental as it focuses on impossibility and mitigation rather than a new solution.
The paper tackles the problem of achieving privacy in constant function market makers (CFMMs) like Uniswap, showing that privacy is impossible under most reasonable adversary models in current implementations, and suggests some mitigating strategies.
Constant function market makers (CFMMs) such as Uniswap, Balancer, Curve, and mStable, among many others, make up some of the largest decentralized exchanges on Ethereum and other blockchains. Because all transactions are public in current implementations, a natural next question is if there exist similar decentralized exchanges which are privacy-preserving; i.e., if a transaction's quantities are hidden from the public view, then an adversary cannot correctly reconstruct the traded quantities from other public information. In this note, we show that privacy is impossible with the usual implementations of CFMMs under most reasonable models of an adversary and provide some mitigating strategies.