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It solves the problem of decentralised liquidity. An order book with traditional market makers is inherently centralised, here we have incredibly simple algorithms for trading between two assets with no intermediary, and the complicated, HFT market makers of traditional finance are replaced by passive liquidity providers.

Not sure why you mention backtesting, or how that would really apply.

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So basically, there is no interesting inherent property (no interesting math, no deeper dynamics), it just "solves" a problem DeFi created - and it only introduces a whole new layer of possible implementation errors and new types of risks like impermanent losses.

Backtesting is relevant because there was no stability analysis, no simulated long drawn out bearmarket, no adversarial probing. Just some minimal quant sugar to make the new gambling opportunity go down with the suckers.

In real finance, you have much more sophisticated and diversified trading algorithms babysitted and regulated for stability, with much higher effective decentralisation and control since different HFT funds are legally barred from conspiring against the traders. Oh, and much lower fees as well.

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