DEEPER: Enhancing Liquidity in Concentrated Liquidity AMM DEX via Sharing

This paper presents Deeper, a design for a decentralized exchange that enhances the average active liquidity via reserve sharing. By doing this, it addresses the problem of shallow liquidity in low trading volume token pairs. Deeper allows liquidity providers of multiple trading pairs against a common token to share liquidity. This is achieved by creating a common reserve pool for the shared token that is accessible by each trading pair. Independent from the shared liquidity, providers are free to add liquidity to individual token pairs without any restriction. The trading between one token pair does not affect the price of other token pairs even though the reserve of the shared token changes. The proposed design is an extension of concentrated liquidity market maker-based DEXs that is simple enough to be implemented on smart contracts. Experiments show that for a batch consisting of 8 trading pairs, Deeper enhances liquidity by over 2.6 − 5.9 ×. This enhancement in liquidity can be increased further by increasing participating tokens in the shared pool.