AMMs as the new form of liquidity - Research

This paper aims to explain the role of Automated Market Makers (AMMs), exploring the historical progression of financial markets that culminated in liquidity challenges solvable by this innovative approach. It examines AMMs as ERC721-based liquidity provider (LP) positions, focusing on their evolution and the groundbreaking innovations introduced through successive versions. A notable development is the introduction of Uniswap v3, which enables concentrated LP positions designed to optimize on-chain liquidity within specific price ranges. This advancement highlights the efficiency and precision offered by these mechanisms in addressing liquidity issues. Ultimately, the paper seeks to equip readers with a comprehensive understanding of the importance of these assets, emphasizing why LPs represent a time-tested solution to contemporary global liquidity problems.