Profitability of Liquidity Provision on Automated Market Makers: An Empirical Analysis of Arbitrage Losses and Trading Fees

Liquidity provision on major Uniswap AMM pools often fails to generate sufficient trading fee revenue to compensate for losses incurred to arbitrageurs, with Uniswap v2 pools performing better than their v3 counterparts. Faster blockchain block times can significantly reduce these arbitrage losses.