Auctioning Time to Mitigate Latency Races: Theory and Evidence from Blockchains
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arXiv
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866911450530840576 |
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| author | Capponi, Agostino Zhu, Brian |
| author_facet | Capponi, Agostino Zhu, Brian |
| contents | High-frequency trading, in both traditional and decentralized markets, induces latency races and redundant order flow as traders spend resources to win time-sensitive opportunities. We show that auctioning artificial time priority can redirect resources away from wasteful speed races toward auction payments. While such waste is difficult to measure in traditional markets, blockchain transactions provide transparent records of these competitive costs through observable duplicate submissions. We study the introduction of Timeboost, a time-priority auction mechanism on Arbitrum, a blockchain that batches transactions before settlement on Ethereum, as a natural experiment. We find that redundant transactions decrease and platform revenue increases relative to comparable networks, consistent with our theoretical predictions. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_10094 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Auctioning Time to Mitigate Latency Races: Theory and Evidence from Blockchains Capponi, Agostino Zhu, Brian Computer Science and Game Theory High-frequency trading, in both traditional and decentralized markets, induces latency races and redundant order flow as traders spend resources to win time-sensitive opportunities. We show that auctioning artificial time priority can redirect resources away from wasteful speed races toward auction payments. While such waste is difficult to measure in traditional markets, blockchain transactions provide transparent records of these competitive costs through observable duplicate submissions. We study the introduction of Timeboost, a time-priority auction mechanism on Arbitrum, a blockchain that batches transactions before settlement on Ethereum, as a natural experiment. We find that redundant transactions decrease and platform revenue increases relative to comparable networks, consistent with our theoretical predictions. |
| title | Auctioning Time to Mitigate Latency Races: Theory and Evidence from Blockchains |
| topic | Computer Science and Game Theory |
| url | https://arxiv.org/abs/2512.10094 |