Market Opportunity - V4 DEX POC
Last updated
Last updated
In the first half of 2023, decentralized exchanges (DEXs) like Uniswap experienced approximately 85% of their trading volume driven by bots executing arbitrage and sandwich attacks. This dominance underscores the significant profitability of these strategies, with external actors capturing substantial value that can possibly benefit Liquidity Providers (LPs).
An analysis of the Uniswap V3 ETH-USDT pool from January to March 2024 showed that an actor with exclusive access to specific arbitrage opportunities could have generated nearly $8.5 million in profit after fees, and up to $15 million without fees. During the same period, Liquidity Providers (LPs) in this pool earned approximately $12.5 million in fees. By introducing the Arbiter Role and auctions, the pool's profits could potentially increase by 50-100% [].
Our research indicates that other pools demonstrate similar profitability relative to their liquidity. We estimate that within Uniswap V3 alone, the potential additional profits for Liquidity Providers (LPs) could range from $400 million to $800 million annually. Including Pancakeswap V3, this figure could rise to between $600 million and $1.2 billion per year. This represents a significant untapped market opportunity where Arbiter could redirect Extractable Value back to LPs, dramatically improving their yields and attracting more liquidity to these platforms [].
