Becoming Immutable: How Ethereum is Made

Andrea Canidio and Vabuk Pahari

Papers from arXiv.org

Abstract: Blockchain's economic value lies in enabling financial and economic transactions that do not require trusted, centralized intermediaries. In practice, however, transactions must pass through several intermediaries before being included on-chain. We study empirically whether this process undermines blockchain's stated benefits by assembling a novel dataset of 15,097 non-winning Ethereum blocks--blocks proposed by builders but not ultimately selected for inclusion. We show that 21% of user transactions are delayed: although proposed in some candidate blocks, they are not included in the winning block. Approximately 30% of these delayed transactions are exclusive to a single losing builder, indicating that transaction routing materially affect inclusion outcomes. We further document substantial heterogeneity in execution quality: both the probability of successful execution and the execution price of users' swaps vary across candidate blocks. Finally, we study two arbitrage bots trading between decentralized (DEX) and centralized exchanges (CEX). We document intense competition for the same arbitrage opportunities and estimate that these bots trade USDC/WETH and USDT/WETH on centralized exchanges at prices approximately 2.8 basis points more favorable than contemporaneous Binance prices.

Date: 2025-06, Revised 2025-12
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