Measuring Arbitrage Losses and Profitability of AMM Liquidity
Fuente:
arXiv
Salvato in:
| Autori principali: | , |
|---|---|
| Natura: | Preprint |
| Pubblicazione: |
2024
|
| Soggetti: | |
| Accesso online: | |
| Tags: |
Aggiungi Tag
Nessun Tag, puoi essere il primo ad aggiungerne!!
|
| _version_ | 1866914763671339008 |
|---|---|
| author | Fritsch, Robin Canidio, Andrea |
| author_facet | Fritsch, Robin Canidio, Andrea |
| contents | This paper presents the results of a comprehensive empirical study of losses to arbitrageurs (following the formalization of loss-versus-rebalancing by [Milionis et al., 2022]) incurred by liquidity providers on automated market makers (AMMs). We show that those losses exceed the fees earned by liquidity providers across many of the largest AMM liquidity pools (on Uniswap). Remarkably, we also find that the Uniswap v2 pools are more profitable for passive LPs than their Uniswap v3 counterparts. We also investigate how arbitrage losses change with block times. As expected, arbitrage losses decrease when block production is faster. However, the rate of the decline varies significantly across different trading pairs. For instance, when comparing 100ms block times to Ethereum's current 12-second block times, the decrease in losses to arbitrageurs ranges between 20% to 70%, depending on the specific trading pair. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2404_05803 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Measuring Arbitrage Losses and Profitability of AMM Liquidity Fritsch, Robin Canidio, Andrea Distributed, Parallel, and Cluster Computing Trading and Market Microstructure This paper presents the results of a comprehensive empirical study of losses to arbitrageurs (following the formalization of loss-versus-rebalancing by [Milionis et al., 2022]) incurred by liquidity providers on automated market makers (AMMs). We show that those losses exceed the fees earned by liquidity providers across many of the largest AMM liquidity pools (on Uniswap). Remarkably, we also find that the Uniswap v2 pools are more profitable for passive LPs than their Uniswap v3 counterparts. We also investigate how arbitrage losses change with block times. As expected, arbitrage losses decrease when block production is faster. However, the rate of the decline varies significantly across different trading pairs. For instance, when comparing 100ms block times to Ethereum's current 12-second block times, the decrease in losses to arbitrageurs ranges between 20% to 70%, depending on the specific trading pair. |
| title | Measuring Arbitrage Losses and Profitability of AMM Liquidity |
| topic | Distributed, Parallel, and Cluster Computing Trading and Market Microstructure |
| url | https://arxiv.org/abs/2404.05803 |