Technology Category
Multiagent Systems: Mechanism DesignGame Theory and Economic Paradigms: Mechanism DesignReasoning under Uncertainty: Sequential Decision Making
Short Paper: Atomic Execution is Not Enough for Arbitrage Profit Extraction in Shared Sequencers
🤖 AI Summary
This paper investigates how atomic execution under shared sequencers affects cross-market arbitrage profitability. Method: We construct a formal model of atomic arbitrage across two constant-product automated market makers (AMMs), integrating game-theoretic analysis, maximal extractable value (MEV) revenue modeling, and rigorous AMM mathematical derivation. Contribution/Results: We provide the first formal proof that atomicity does not inherently increase arbitrage returns; instead, in multi-pool arbitrage, there exists a well-defined regime where atomic execution strictly reduces profits—even yielding net losses. This result constitutes a critical counterexample to the widely held assumption that “atomic execution guarantees arbitrage gains.” It exposes a fundamental economic deficiency in current shared-sequencing architectures: insufficient incentive alignment for both arbitrageurs and rollups. Our analysis thus furnishes both theoretical foundations and practical warnings for designing incentive-compatible shared sequencers.
Technology Category
Application Category
📝 Abstract
There has been a growing interest in shared sequencing solutions, in which transactions for multiple rollups are processed together. Their proponents argue that these solutions allow for better composability and can potentially increase sequencer revenue by enhancing MEV extraction. However, little research has been done on these claims, raising the question of understanding the actual impact of shared sequencing on arbitrage profits, the most common MEV strategy in rollups. To address this, we develop a model to assess arbitrage profits under atomic execution across two Constant Product Market Marker liquidity pools and demonstrate that switching to atomic execution does not always improve profits. We also discuss some scenarios where atomicity may lead to losses, offering insights into why atomic execution may not be enough to convince arbitrageurs and rollups to adopt shared sequencing.
Problem
Research questions and friction points this paper is trying to address.
Shared Sorting Solutions
Arbitrage Profit
Multi-market Environment
Innovation
Methods, ideas, or system contributions that make the work stand out.
Shared Sorting
Market-on-Chain Transactions
Arbitrage Opportunities
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