Quantifying Arbitrage in Automated Market Makers: An Empirical Study of Ethereum ZK Rollups

Krzysztof Gogol (), Johnnatan Messias, Deborah Miori, Claudio Tessone and Benjamin Livshits
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Krzysztof Gogol: University of Zurich
Johnnatan Messias: Matter Labs
Deborah Miori: Imperial College London
Claudio Tessone: University of Zurich
Benjamin Livshits: University of Oxford

Chapter Chapter 9 in Mathematical Research for Blockchain Economy, 2024, pp 173-192 from Springer

Abstract: Abstract Arbitrage opportunities arise from the simultaneous buying and selling of the same asset in different markets to profit from price differences. This research systematically explores arbitrage possibilities between Automated Market Makers (AMMs) on Ethereum zk-roll-ups and Centralized Exchanges (CEXs). To start, we introduce a theoretical framework to assess arbitrage opportunities and develop a formula for the Maximal Arbitrage Value (MAV), considering both price discrepancies and the liquidity present in trading venues. Following this, we conduct an empirical assessment of the historical MAV between SyncSwap, an AMM on zkSync Era, and Binance, examining the speed at which price discrepancies are resolved considering both explicit and implicit market costs. Overall, the total MAV from July to September 2023 in the USDC-ETH SyncSwap pool amounts to $104.96K (0.24% of trading volume).

Keywords: Arbitrage; Automated market maker; Rollup (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-3-031-68974-1_9

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DOI: 10.1007/978-3-031-68974-1_9

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