Core Concepts
Arbitrage opportunities between AMMs and CEXs on Ethereum zk-roll-ups are quantified using the Maximal Arbitrage Value (MAV) metric.
Abstract
This study explores arbitrage opportunities between Automated Market Makers (AMMs) on Ethereum zk-roll-ups and Centralised Exchanges (CEXs). It introduces the concept of Maximal Arbitrage Value (MAV) to measure potential profits from price divergences. The research focuses on the USDC-ETH SyncSwap pool, identifying a cumulative MAV of $104.96k from July to September 2023. Various scaling solutions for blockchains are discussed, emphasizing the shift towards roll-ups due to lower gas fees. The paper also delves into the efficiency of DEXs on zkSync Era compared to Binance, analyzing price convergence and liquidity impact on arbitrage opportunities.
Structure:
Introduction to DeFi and blockchain scalability challenges.
Background on Layer-2 scaling and roll-ups.
Overview of Crypto Centralised Exchanges (CEXs) and Decentralised Exchanges (DEXs).
The Theory of Arbitrage on AMMs, including MAV calculation.
Empirical Case Study on zkSync Era, data extraction, and proposed framework.
Insights into MAV Opportunities Identified through clustering analysis.
Regression Analysis for predicting time decay based on MAV magnitude and fees.
Conclusions highlighting implications for roll-up design and future research directions.
Stats
Overall cumulative MAV from July to September 2023: $104.96k (0.24% of trading volume).
Quotes
"Decentralized Finance presents a novel alternative to traditional financial services."
"Roll-ups offer 50 times lower gas fees compared to the underlying chain."