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DOI: 10.4230/LIPIcs.AFT.2025.8

Strategic Analysis of Just-In-Time Liquidity Provision in Concentrated Liquidity Market Makers

Authors: Bruno Llacer Trotti, Weizhao Tang, Rachid El-Azouzi, Giulia Fanti, and Daniel Sadoc Menasché

Published in: LIPIcs, Volume 354, 7th Conference on Advances in Financial Technologies (AFT 2025)

Abstract

Liquidity providers (LPs) are essential figures in the operation of automated market makers (AMMs); in exchange for transaction fees, LPs lend the liquidity that allows AMMs to operate. While many prior works have studied the incentive structures of LPs in general, we currently lack a principled understanding of a special class of LPs known as Just-In-Time (JIT) LPs. These are strategic agents who momentarily supply liquidity for a single swap, in an attempt to extract disproportionately high fees relative to the remaining passive LPs. This paper provides the first formal, transaction-level model of JIT liquidity provision for a widespread class of AMMs known as Concentrated Liquidity Market Makers (CLMMs), as seen in Uniswap V3, for instance. We characterize the landscape of price impact and fee allocation in these systems, formulate and analyze a non-linear optimization problem faced by JIT LPs, and prove the existence of an optimal strategy. By fitting our optimal solution for JIT LPs to real-world CLMMs, we observe that in liquidity pools (particularly those with risky assets), there is a significant gap between observed and optimal JIT behavior. Existing JIT LPs often fail to account for price impact; doing so, we estimate they could increase earnings by up to 69% on average over small time windows. We also show that JIT liquidity, when deployed strategically, can improve market efficiency reducing slippage for traders, albeit at the cost of eroding passive LP profits by up to 44% per trade on average.

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Bruno Llacer Trotti, Weizhao Tang, Rachid El-Azouzi, Giulia Fanti, and Daniel Sadoc Menasché. Strategic Analysis of Just-In-Time Liquidity Provision in Concentrated Liquidity Market Makers. In 7th Conference on Advances in Financial Technologies (AFT 2025). Leibniz International Proceedings in Informatics (LIPIcs), Volume 354, pp. 8:1-8:22, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2025)

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@InProceedings{llacertrotti_et_al:LIPIcs.AFT.2025.8,
  author =	{Llacer Trotti, Bruno and Tang, Weizhao and El-Azouzi, Rachid and Fanti, Giulia and Menasch\'{e}, Daniel Sadoc},
  title =	{{Strategic Analysis of Just-In-Time Liquidity Provision in Concentrated Liquidity Market Makers}},
  booktitle =	{7th Conference on Advances in Financial Technologies (AFT 2025)},
  pages =	{8:1--8:22},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-400-0},
  ISSN =	{1868-8969},
  year =	{2025},
  volume =	{354},
  editor =	{Avarikioti, Zeta and Christin, Nicolas},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2025.8},
  URN =		{urn:nbn:de:0030-drops-247278},
  doi =		{10.4230/LIPIcs.AFT.2025.8},
  annote =	{Keywords: Concentrated Liquidity Market Makers, Uniswap, Just-in-Time}
}

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DOI: 10.4230/LIPIcs.AFT.2024.3

CFT-Forensics: High-Performance Byzantine Accountability for Crash Fault Tolerant Protocols

Authors: Weizhao Tang, Peiyao Sheng, Ronghao Ni, Pronoy Roy, Xuechao Wang, Giulia Fanti, and Pramod Viswanath

Published in: LIPIcs, Volume 316, 6th Conference on Advances in Financial Technologies (AFT 2024)

Abstract

Crash fault tolerant (CFT) consensus algorithms are commonly used in scenarios where system components are trusted - e.g., enterprise settings and government infrastructure. However, CFT consensus can be broken by even a single corrupt node. A desirable property in the face of such potential Byzantine faults is accountability: if a corrupt node breaks the protocol and affects consensus safety, it should be possible to identify the culpable components with cryptographic integrity from the node states. Today, the best-known protocol for providing accountability to CFT protocols is called PeerReview; it essentially records a signed transcript of all messages sent during the CFT protocol. Because PeerReview is agnostic to the underlying CFT protocol, it incurs high communication and storage overhead. We propose CFT-Forensics, an accountability framework for CFT protocols. We show that for a special family of forensics-compliant CFT protocols (which includes widely-used CFT protocols like Raft and multi-Paxos), CFT-Forensics gives provable accountability guarantees. Under realistic deployment settings, we show theoretically that CFT-Forensics operates at a fraction of the cost of PeerReview. We subsequently instantiate CFT-Forensics for Raft, and implement Raft-Forensics as an extension to the popular nuRaft library. In extensive experiments, we demonstrate that Raft-Forensics adds low overhead to vanilla Raft. With 256 byte messages, Raft-Forensics achieves a peak throughput 87.8% of vanilla Raft at 46% higher latency (+44 ms). We finally integrate Raft-Forensics into the open-source central bank digital currency OpenCBDC, and show that in wide-area network experiments, Raft-Forensics achieves 97.8% of the throughput of Raft, with 14.5% higher latency (+326 ms).

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Weizhao Tang, Peiyao Sheng, Ronghao Ni, Pronoy Roy, Xuechao Wang, Giulia Fanti, and Pramod Viswanath. CFT-Forensics: High-Performance Byzantine Accountability for Crash Fault Tolerant Protocols. In 6th Conference on Advances in Financial Technologies (AFT 2024). Leibniz International Proceedings in Informatics (LIPIcs), Volume 316, pp. 3:1-3:25, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2024)

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@InProceedings{tang_et_al:LIPIcs.AFT.2024.3,
  author =	{Tang, Weizhao and Sheng, Peiyao and Ni, Ronghao and Roy, Pronoy and Wang, Xuechao and Fanti, Giulia and Viswanath, Pramod},
  title =	{{CFT-Forensics: High-Performance Byzantine Accountability for Crash Fault Tolerant Protocols}},
  booktitle =	{6th Conference on Advances in Financial Technologies (AFT 2024)},
  pages =	{3:1--3:25},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-345-4},
  ISSN =	{1868-8969},
  year =	{2024},
  volume =	{316},
  editor =	{B\"{o}hme, Rainer and Kiffer, Lucianna},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2024.3},
  URN =		{urn:nbn:de:0030-drops-209399},
  doi =		{10.4230/LIPIcs.AFT.2024.3},
  annote =	{Keywords: CFT Protocols, forensics, blockchain}
}

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Documents authored by Fanti, Giulia

Strategic Analysis of Just-In-Time Liquidity Provision in Concentrated Liquidity Market Makers

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CFT-Forensics: High-Performance Byzantine Accountability for Crash Fault Tolerant Protocols

Abstract

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