notes.txt

https://twitter.com/_mahimna/status/1380929323419410438

https://www.longhash.com/en/news/3324/DeFi%E2%80%99s-Oracle-Problem-May-Not-Be-Solvable



https://ipfs.io/ipfs/bafykbzaceb4g2yaljyy2erfqjfbk5qwdb7tkuxg42hf2jbianlhcoqvsm4jmw?filename=Reto%20Francioni%2C%20Robert%20A.%20Schwartz%20%28eds.%29%20-%20Equity%20Markets%20in%20Transition_%20The%20Value%20Chain%2C%20Price%20Discovery%2C%20Regulation%2C%20and%20Beyond-Springer%20International%20Publishing%20%282017%29.pdf


An exchange’s economic function is not simply to make the transactions but 
(and this is the bigger challenge) an exchange also “produces” the prices at which 
the transactions are made. Delivering quality price discovery is a defining function 
of a stock exchange. From a definitional perspective, any trading facility that has as 
its primary function the delivery of good price discovery can, de facto at least, be 
considered an exchange. Unfortunately, however, the price discovery function of an 
exchange typically receives insufficient attention in market structure discussions. 
This is largely attributable to the non-observability of equilibrium prices and, therefore, to the difficulty of quantifying the deviations of transaction prices from their 
equilibrium values



aving recognized (a) the importance of an exchange delivering reasonably accurate price discovery, (b) that the quality of price discovery can be assessed by an 
intraday volatility metric, and (c) that intraday, first half-hour volatility can be strikingly high, we have one further matter to address at this time: the relationship 
between the quality of price discovery and a market’s architecture.


file:///C:/Users/Jay/Downloads/Barclay%20And%20Hendershott%20-%20Price%20Discovery%20And%20Trading%20After%20Hours%20(2).pdf

Generate significant price discovery with litte trading  


Price and Roll - https://www.sciencedirect.com/science/article/abs/pii/0304405X86900048

BaRCLAY lIZENBERGER wARNER 

https://econpapers.repec.org/article/ouprfinst/v_3a3_3ay_3a1990_3ai_3a2_3ap_3a233-53.htm
file:///C:/Users/Jay/Downloads/Telegram%20Desktop/barclay1990.pdf


Faucault

https://alo.mit.edu/wp-content/uploads/2015/08/EconometricModelsLimitOrderExecutions2002.pdf

There is a large and growing theoretical literature that considers the economic role
of limit orders in the price discovery process. Foucault (1993), Glosten (1989, 1994),
Easley and O’Hara (1991), Parlour (1998), Chakravarty and Holden (1995),
Kavajecz (1998), Rock (1996), Sandas (1999), and Seppi (1997) are just a few recent (
examples. The general focus of these papers is the effect of limit orders on the
market, the interaction between limit and market orders, and the role of the market
maker. None of these studies is set in a continuous-trading environment, hence they
provide little direct guidance for modeling limit-order execution times


https://faculty.washington.edu/ezivot/research/dynamicsOfPriceDiscovery.pdf

Price discovery is one of the central functions of financial markets. In the market
microstructure literature, it has been variously interpreted as, “the search for an equilibrium price” (Schreiber and Schwartz (1986)), “gathering and interpreting news”
(Baillie et. al. (2002)), “the incorporation of the information implicit in investor
trading into market prices” (Lehmann (2002)). These interpretations suggest that
price discovery is dynamic in nature, and an efficient price discovery process is characterized by the fast adjustment of market prices from the old equilibrium to the
new equilibrium with the arrival of new information. In particular, Madhavan (2002)
distinguishes dynamic price discovery issues from static issues such as trading cost
determination


e. As a result, our methodology establishes
a framework to directly quantify the dynamics of price discover


https://ipfs.io/ipfs/bafykbzaceb4g2yaljyy2erfqjfbk5qwdb7tkuxg42hf2jbianlhcoqvsm4jmw?filename=Reto%20Francioni%2C%20Robert%20A.%20Schwartz%20%28eds.%29%20-%20Equity%20Markets%20in%20Transition_%20The%20Value%20Chain%2C%20Price%20Discovery%2C%20Regulation%2C%20and%20Beyond-Springer%20International%20Publishing%20%282017%29.pdf 


4.1 Price Discovery
4.1.1 Importance of Price Discovery
Price discovery is achieved as orders are submitted to a market and turned into 
trades. A transaction price is, of course, determined each time a trade is consummated, but price discovery refers to something more fundamental. Price discovery



Bisq is focused on settlement and self custody.
The market is quote driven. Market makers provide liquidity at specified prices  and volumes for Takers to accept or ignore. MM earn no special privilege as is common on CEXs. 
There is no matching engine with predefined rules to facilitate the trade, the order depth is set by the MM and bids accepted or ignored. 
(Trading is slow and in general the spread is wider than on CEX. )
Using DEXs on Eth works in a similar fashion, the various swap markets are quote driven and orders accepted by takers. No matching engine with predefined rules to facilitate trade exists. 
The matching engine on these platforms facilitates trade 
Why is it that quote driven orderbooks have been made the standard of how decentralized finance is conducted over ten years after Satoshi made the impossible dream of p2p electronic cash come true and how good is this solution for qualitative price discovery?

As is well documented in papers, Miner Extracted Value(Mev) has become a phenomenon in relation to swap protocols serving as Dexs. 
By using the advantage of virtual co-location. Miners are able to front-run transactions on swap protocols by having the advantages of being able to see and add transactions as they see fit. The Miner acts as the matching engine. 
 
Is there a difference between how this works on top of Bitcoin and Turing complete blockchains such as Ethereum?
Let’s study Satsohi’s vision first: 
Peer to peer electronic cash. The true invention was solving the double spend problem. On top of that the opportunity to transact without trust arose. Miners effectively choose between two conflicting transactions to settle a dispute. 
What happens when this is transferred to a Turing complete setting, such as Etherium?
First of all, the whole point of Ethereum is assumed to be the freedom to write whatever code you like. Meaning when a transaction is accepted by the network, one cannot be sure what is affected and what is not so the code can’t be reasoned about or standardized. Every line must be executed to know the outcome. This leads to order-dependence. Whoever gets in a block first might be of great importance to the outcome. In a world of settling trades it becomes especially obvious how important the sequence of transactions is. Did I Get hit before I cancelled? Was my bid accepted before the price dropped? These are examples of questions that’ll eventually settle the financial status of individuals. 

So how does Bisq work on Bitcoin without frontrunning but swap contracts on Ethereum are prone to front running? On bisq, we have known transaction types, there are no liquidity pools onchain.