Paradigm Research: How to use rebalancing strategies to profit from Uniswap?



Set up problem

Traditional thinking



Control standard

Volatility Drag

Wait, what happened?

Rebalancing value


Cost alchemy


LP wealth growth rate

Optimal fees and excess returns


  1. If the volatility resistance makes the asset loss more than 200% of its average log return, then rebalancing on Uniswap will not eliminate enough resistance, then you’d better hold stablecoins.
  2. If volatility resistance makes the asset loss less than 66% of its average log return, then rebalancing on Uniswap is not worthwhile, and you’d better simply hold the asset.
  3. Within this range, becoming a Uniswap LP will eventually make you rich, in fact, richer than any unbalanced portfolio of stablecoins and volatile assets you hold. This includes assets that will eventually become worthless, as well as assets that will exhibit parabolic growth.


How much should we trust in the results of these studies?

future job

  1. How to turn these results into a multi-asset case, or when can LP choose a ratio other than 50/50 like Balancer to rebalance?
  2. What happens when we no longer allow unlimited transactions per unit of time?
  3. What happens when we introduce transaction costs that can even be changed to reflect the dynamics of priority gas auctions?
  1. Can we estimate these parameters for securities transactions on the market today?
  2. How many actively traded tokens can benefit from the rebalancing strategy we describe?
  3. Can we determine what percentage of Uniswap LP returns are realized in reality due to volatility returns?





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