Research Papers to Read on Cryptocurreny Exchanges

Research Papers to Read on Cryptocurreny Exchanges

Technology
May 21, 2022 by
7
Photo by Maxim Hopman on Unsplash Empirical Analysis of Indirect Internal Conversions in Cryptocurrency Exchanges(arXiv) Author : Paz Grimberg, Tobias Lauinger, Damon McCoy Abstract : Algorithmic trading is well studied in traditional financial markets. However, it has received less attention in centralized cryptocurrency exchanges. The Commodity Futures Trading Commission (CFTC) attributed the 2010 flash crash, one of the most
Research Papers to Read on Cryptocurreny Exchanges

Photo by Maxim Hopman on Unsplash
Empirical Analysis of Indirect Internal Conversions in Cryptocurrency Exchanges(arXiv)

Author : Paz Grimberg, Tobias Lauinger, Damon McCoy

Abstract : Algorithmic trading is well studied in traditional financial markets. However, it has received less attention in centralized cryptocurrency exchanges. The Commodity Futures Trading Commission (CFTC) attributed the 2010 flash crash, one of the most turbulent periods in the history of financial markets that saw the Dow Jones Industrial Average lose 9% of its value within minutes, to automated order “spoofing” algorithms. In this paper, we build a set of methodologies to characterize and empirically measure different algorithmic trading strategies in Binance, a large centralized cryptocurrency exchange, using a complete data set of historical trades. We find that a sub-strategy of triangular arbitrage is widespread, where bots convert between two coins through an intermediary coin, and obtain a favorable exchange rate compared to the direct one. We measure the profitability of this strategy, characterize its risks, and outline two strategies that algorithmic trading bots use to mitigate their losses. We find that this strategy yields an exchange ratio that is 0.144%, or 14.4 basis points (bps) better than the direct exchange ratio. 2.71% of all trades on Binance are attributable to this strategy.

2.Economic Analyses of Security Investments on Cryptocurrency Exchanges (arXiv)

Author : Benjamin Johnson, Aron Laszka, Jens Grossklags, Tyler Moore

Abstract : Cryptocurrency exchanges are frequently targeted and compromised by cyber-attacks, which may lead to significant losses for the depositors and closure of the affected exchanges. These risks threaten the viability of the entire public blockchain ecosystem since exchanges serve as major gateways for participation in public blockchain technologies. In this paper, we develop an economic model to capture the short-term incentives of cryptocurrency exchanges with respect to making security investments and establishing transaction fees. Using the model, we derive conclusions regarding an exchange’s optimal economic decisions, and illustrate key features of these conclusions using graphs based on real-world data. Our security investment model exhibits horizontal scaling properties with respect to reducing exposure to losses, and may be of special interest to exchanges operating in markets with high price volatility.

3. Characterizing Cryptocurrency Exchange Scams(arXiv)

Author : Pengcheng Xia, Bowen Zhang, Ru Ji, Bingyu Gao, Lei Wu, Xiapu Luo, Haoyu Wang, Guoai Xu

Abstract : As the indispensable trading platforms of the ecosystem, hundreds of cryptocurrency exchanges are emerging to facilitate the trading of digital assets. While, it also attracts the attentions of attackers. A number of scam attacks were reported targeting cryptocurrency exchanges, leading to a huge mount of financial loss. However, no previous work in our research community has systematically studied this problem. In this paper, we make the first effort to identify and characterize the cryptocurrency exchange scams. We first identify over 1,500 scam domains and over 300 fake apps, by collecting existing reports and using typosquatting generation techniques. Then we investigate the relationship between them, and identify 94 scam domain families and 30 fake app families. We further characterize the impacts of such scams, and reveal that these scams have incurred financial loss of 520k US dollars at least. We further observe that the fake apps have been sneaked to major app markets (including Google Play) to infect unsuspicious users. Our findings demonstrate the urgency to identify and prevent cryptocurrency exchange scams. To facilitate future research, we have publicly released all the identified scam domains and fake apps to the community

4.Dynamic Curves for Decentralized Autonomous Cryptocurrency Exchanges (arXiv)

Author : Bhaskar Krishnamachari, Qi Feng, Eugenio Grippo

Abstract : One of the exciting recent developments in decentralized finance (DeFi) has been the development of decentralized cryptocurrency exchanges that can autonomously handle conversion between different cryptocurrencies. Decentralized exchange protocols such as Uniswap, Curve and other types of Automated Market Makers (AMMs) maintain a liquidity pool (LP) of two or more assets constrained to maintain at all times a mathematical relation to each other, defined by a given function or curve. Examples of such functions are the constant-sum and constant-product AMMs. Existing systems however suffer from several challenges. They require external arbitrageurs to restore the price of tokens in the pool to match the market price. Such activities can potentially drain resources from the liquidity pool. In particular, dramatic market price changes can result in low liquidity with respect to one or more of the assets and reduce the total value of the LP. We propose in this work a new approach to constructing the AMM by proposing the idea of dynamic curves. It utilizes input from a market price oracle to modify the mathematical relationship between the assets so that the pool price continuously and automatically adjusts to be identical to the market price. This approach eliminates arbitrage opportunities and, as we show through simulations, maintains liquidity in the LP for all assets and the total value of the LP over a wide range of market prices.

5.Toward Understanding the Use of Centralized Exchanges for Decentralized Cryptocurrency(arXiv)

Author : Zhixuan Zhou, Bohui Shen

Abstract : Cryptocurrency has been extensively studied as a decentralized financial technology built on blockchain. However, there is a lack of understanding of user experience with cryptocurrency exchanges, the main means for novice users to interact with cryptocurrency. We conduct a qualitative study to provide a panoramic view of user experience and security perception of exchanges. All 15 Chinese participants mainly use centralized exchanges (CEX) instead of decentralized exchanges (DEX) to trade decentralized cryptocurrency, which is paradoxical. A closer examination reveals that CEXes provide better usability and charge lower transaction fee than DEXes. Country-specific security perceptions are observed. Though DEXes provide better anonymity and privacy protection, and are free of governmental regulation, these are not necessary features for many participants. Based on the findings, we propose design implications to make cryptocurrency trading more decentralized.

Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing

Also, Read

Bookmap Review | 5 Best Crypto Exchanges in the USA

The Best Crypto Hardware wallet | Bitbns Review

10 Best Crypto Exchange in Singapore | Buy AXS

Red Dog Casino Review | Swyftx Review | CoinGate Review

Best Crypto to Invest in India | WazirX P2P | Hi Dollar Review

Best Crypto Trading bots in Canada | KuCoin Review

Research Papers to Read on Cryptocurreny Exchanges was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.

Add a comment