Saved in:
| Main Authors: | , , , , |
|---|---|
| Format: | Preprint |
| Published: |
2024
|
| Subjects: | |
| Online Access: | https://arxiv.org/abs/2410.10797 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866908335502000128 |
|---|---|
| author | Fritsch, Robin Silva, Maria Inês Mamageishvili, Akaki Livshits, Benjamin Felten, Edward W. |
| author_facet | Fritsch, Robin Silva, Maria Inês Mamageishvili, Akaki Livshits, Benjamin Felten, Edward W. |
| contents | As blockchains begin processing significant economic activity, the ability to include and order transactions inevitably becomes highly valuable, a concept known as Maximal Extractable Value (MEV). This makes effective mechanisms for transaction inclusion and ordering, and thereby the extraction of MEV, a key aspect of blockchain design. Beyond traditional approaches such as ordering in a first-come-first-serve manner or using priority fees, a recent proposal suggests auctioning off a time advantage for transaction inclusion. In this paper, we investigate this time advantage mechanism, focusing specifically on arbitrage opportunities on Automated Market Makers (AMMs), one of the largest sources of MEV today. We analyze the optimal strategy for a time-advantaged arbitrageur and compare the profits generated by various MEV extraction methods. Finally, we explore how AMMs can be adapted in the time advantage setting to capture a portion of the MEV. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2410_10797 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | MEV Capture Through Time-Advantaged Arbitrage Fritsch, Robin Silva, Maria Inês Mamageishvili, Akaki Livshits, Benjamin Felten, Edward W. Distributed, Parallel, and Cluster Computing As blockchains begin processing significant economic activity, the ability to include and order transactions inevitably becomes highly valuable, a concept known as Maximal Extractable Value (MEV). This makes effective mechanisms for transaction inclusion and ordering, and thereby the extraction of MEV, a key aspect of blockchain design. Beyond traditional approaches such as ordering in a first-come-first-serve manner or using priority fees, a recent proposal suggests auctioning off a time advantage for transaction inclusion. In this paper, we investigate this time advantage mechanism, focusing specifically on arbitrage opportunities on Automated Market Makers (AMMs), one of the largest sources of MEV today. We analyze the optimal strategy for a time-advantaged arbitrageur and compare the profits generated by various MEV extraction methods. Finally, we explore how AMMs can be adapted in the time advantage setting to capture a portion of the MEV. |
| title | MEV Capture Through Time-Advantaged Arbitrage |
| topic | Distributed, Parallel, and Cluster Computing |
| url | https://arxiv.org/abs/2410.10797 |