Original title: Multi-Currency AMMs for Decentralized FOREX Markets: Feasibility & Optimal Design
Reina Ke Xin Li, Andreas Park, Andreas Veneris, Srisht Fateh Singh · July 2026
Trading between two rare currencies is tough because direct markets rarely exist. Today, people must swap through a major middleman currency, which adds costs. Researchers explored using multi-currency automated market makers to fix this. An automated market maker is code that lets people trade tokens automatically from a single shared pool of money. Storing many currencies together pools liquidity, which lowers the price impactThe change in price caused by a trade itself; larger trades move the price more. of large trades. However, combining currencies also raises impermanent lossA temporary loss in value that can happen when you provide funds to a trading pool, because the relative prices of the assets change., which is the cost liquidity providers pay when relative exchange rates shift. Balancing these forces, the team calculated optimal pool weights and grouped 43 currencies into custom pools. This setup beat standard routing, lowering realized costs by ~13% even during severe financial stress.
You want to trade a rare coin for another rare coin at a flea market. No dealer trades that pair directly, so you must first sell your coin for a common coin like a dollar, then buy the other coin with dollars. That extra step costs you fees. In this paper, a single stall pools many rare coins together, letting you trade any two directly without the dollar middleman, and the stall owner adjusts the exchange rates to minimize your total cost.
International money transfers and currency trading currently rely on routing through a dominant currency like the US dollar, adding costs. This research shows that grouping related currencies into a single automated market maker can cut those costs by 13%, even during financial crises. For businesses and individuals, that means cheaper cross-border payments and a more resilient forex system.
The abstract doesn't state limitations explicitly, but based on its scope: the analysis assumes a constant-mean AMM architecture and uses data for 43 currencies over 2008-2023. Results may not generalize to other AMM designs, currencies, or time periods. Implementation challenges such as smart contract security and regulatory compliance are not addressed.
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Multi-Currency AMMs for Decentralized FOREX Markets: Feasibility & Optimal Design — Reina Ke Xin Li, Andreas Park, Andreas Veneris et al.
Abstract licence: CC0
Explanation generated by Synthesis from the abstract — it is not the original paper. This is a preprint, so it hasn't necessarily been peer reviewed.