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Is it all just automated arbitration?

Trading volume on decentralized exchanges (DEX) increased last week.

By Mike Hesp
• 2 min read
Is it all just automated arbitration?

Trading volume on decentralized exchanges (DEX) increased last week. Is this due to Memecoin hype or arbitrage bots?

The weekly On-chain Report shows. That crypto trading on decentralized exchanges (DEX) increased last week. Likewise, transaction fees in the Ethereum network (gas fees) have risen a lot. In particular, the DEX Uniswap (UNI) has recorded a 388 percent increase in "gas fees" since April. As a result, between 7 and 14 percent of the total gas demand on the Ethereum network is taken up by the decentralized exchange.

A look at the top 10 traders of the last month on Uniswap shows, however, that with one exception they are all so-called MEV bots. They seek to generate profits through arbitrage (i.e. price differences of the same assets). MEV stands for "maximum extractable value."

The principle is a bit complicated. You want to capture transactions in the mempool of the blockchain that may have a price impact on the asset at DEX. MEV bots then add corresponding trades to the same mempool to place the trades in the same block and take advantage of the resulting price difference.

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