SAMM: Sharded Automated Market Maker

TL;DR

SAMM introduces a sharded automated market maker that enables parallel execution on blockchains, significantly increasing throughput and addressing scalability issues in decentralized finance.

Contribution

It proposes a novel sharding architecture for AMMs with incentive-compatible security, validated through game-theoretic analysis and real-world blockchain deployment.

Findings

SAMM achieves 5x and 16x throughput improvements on Sui and Solana.

The design incentivizes liquidity balancing and even trade distribution.

Validated through simulation and deployment on testnets.

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 receive 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. The security of SAMM, unlike in classical sharding solutions, 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 high-demand-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.