Working Papers

Automated Market Making for Energy Sharing [slides]
(with Matheus Ferreira, Viraj Nadkarni, and Leonardo Leone)

We develop an axiomatic theory for Automated Market Makers (AMMs) in local energy sharing markets and analyze the Markov Perfect Equilibrium of the resulting economy with a Mean-Field Game. In this game, heterogeneous prosumers solve a Bellman equation to optimize energy consumption, storage, and exchanges. Our axioms identify a class of mechanisms with affine, Lipschitz continuous payment functions, where prices decrease with the aggregate supply-to-demand ratio of energy. We prove that implementing batch execution and concentrated liquidity allows standard design conditions from decentralized finance—quasi-concavity, monotonicity, and homotheticity—to construct AMMs that satisfy our axioms. The resulting AMMs are budget-balanced and achieve ex-ante efficiency, contrasting with the strategy-proof, ex-post optimal VCG mechanism. Since the AMM implements a Potential Game, we solve its equilibrium by first computing the social planner’s optimum and then decentralizing the allocation. Numerical experiments using data from the Paris administrative region suggest that the prosumer community can achieve gains from trade up to 40\% relative to the grid-only benchmark.

A Theory of Crowdfunding Dynamics (with Matthew Ellman)
[BSE Focus article] [Slides]

This paper develops a dynamic model of crowdfunding to characterize success rates and welfare and to identify optimal transparency and design policies. We also characterize average bidding profiles. Bidding costs generate two dynamic forces: (1) decreasing pivotality, driven by reduced scope for strategic complementarity as the deadline nears, pushes the slope downwards; (2) a news effect from observed bidding further pushes the slope downwards for concave cost distributions, but upwards for convex costs. These effects can explain prominent bidding patterns. Non-disclosure of funding progress yields higher welfare than full transparency given homogeneous costs. However, cost heterogeneity favours disclosure by enabling early bidders to activate otherwise passive, higher cost bidders. We also investigate the tradeoff between raising prices and thresholds and we demonstrate success and welfare gains from the indirect dynamic pricing permitted by current platforms.

Published Papers

Latency Tradeoffs in Blockchain Capacity Management
[Decentralized Thoughts article] [Slides] [Journal version]
Decisions in Economics and Finance (DOI: https://doi.org/10.1007/s10203-025-00556-3)
Best paper award – International Fintech Research Conference (Naples, November 2023)

We analyze the effect of block propagation latency on the performance and design of Nakamoto-style blockchains. Miners strategically choose block capacity, balancing the risk of invalidation from forking with transaction fee income. The model identifies a unique and symmetric Nash equilibrium block capacity, which increases with the ratio of block production time to transmission delay and decreases with the ratio of coinbase reward to transaction fee rate. We endogenize blockchain growth and derive the Master Equation for pending mempool data. The results reveal a trade-off between efficiency (low transaction load) and security (high miner participation). Reducing the coinbase reward while raising transaction fees improves efficiency but may weaken security. We also discuss testable implications and extend the model to include uncle block rewards and discrete latency.

The Economics of Constant Function Market Makers (with Julien Prat)
[Journal version] [Slides]
Journal of Corporate Finance (DOI: https://doi.org/10.1016/j.jcorpfin.2025.102737)

We use microeconomic theory to describe the inner workings of Constant Function Market Makers (CFMMs). We show that standard results from consumer theory apply in this new context, endowing us with powerful tools to characterize the optimal design of CFMMs. We employ them to analyze the externalities that traders and liquidity providers exert on each other when interacting through a CFMM. Liquidity providers reduce the execution costs by flattening the bonding curve on which trades are executed. Arbitrageurs impose an adverse selection cost on liquidity providers by unfavorably rebalancing their portfolio. We show that the strengths of these two externalities are pinned down by the curvature of the bonding curve and are inversely related to each other, thereby identifying the fundamental economic tradeoff that market designers have to address.

Book Chapters

SoK: Constant Function Market Makers (with Julien Prat and Myriam Kassoul)
[Working paper version]
Chapter 10 in “A Companion to Decentralized Finance, Digital Assets and Blockchain Technologies“, edited by Eward Elgar Publishing Ltd.
(DOI: https://doi.org/10.4337/9781035307760.00015)

We provide an overview of the academic literature on Automated Market Makers for Decentralized Exchanges. Our review puts an emphasis on contributions from researchers in economics and finance. We cover papers that study the optimal design of Automated Market Makers. Then we discuss models that leverage the insights from the literature on two-sided markets to characterize the equilibrium size of liquidity pools and the incentives of liquidity providers. Finally, we review recent research on the interactions between Miner Extractible Value and Decentralized Exchanges.

Outlooks and Non-Scientific Publications

A Hitchhiker’s Guide to Decentralized Finance

Decentralized Finance is a major innovation trend that is shaking the FinTech world. DeFi refers to a universe of financial applications that rely on blockchain technology to achieve decentralization. In other words, DeFi applications allow their users to perform traditional financial operations without relying on intermediaries, which are instead crucial in traditional, Centralized Finance. This outlook provides an overview of the technological stacks upon which DeFi is built and discusses the emerging trends that are shaping this new industry.