Uniswap Liquidity Provision: An Online Learning Approach

Yogev Bar-On, Yishay Mansour

Abstract: Uniswap v3 is a decentralized exchange (DEX) that allows liquidity providers to allocate funds more efficiently by specifying an active price interval for their funds. This introduces the problem of finding an optimal strategy for choosing price intervals. We formalize this problem as an online learning problem with non-stochastic rewards. We use regret-minimization methods to show a Liquidity Provision strategy that guarantees a lower bound on the reward. This is true even for non-stochastic changes to asset pricing, and we express this bound in terms of the trading volume and the average price change.