Introduction
Despite the adoption of Automated Market Makers (AMMs) in the DeFi space, numerous problems persist. Liquidity providers(LPs) enter the market with the expectation of earning fees by effectively acting as the “house.” However, the inherent design of Constant Function AMMs (CFAMMs), combined with the passive nature of liquidity provision, leaves users vulnerable to Maximum Extractable Value (MEV) exploits and impermanent losses (or re-balancing induced losses).
The susceptibility of CFAMMs to MEV attacks is particularly pronounced, with Uniswap v2 being a notable target for MEV attacks. The static nature of liquidity within CFAMMs creates opportunities for MEV searchers to perform CEX-DEX arbitrages due to stale prices.
Furthermore, the prevalence of sandwich attacks is a concerning issue. These attacks involve MEV bot