Paper: arXiv 2507.13023

Authors: Fei Wu, Danning Sui, Thomas Thiery, Mallesh Pai

Abstract

This paper provides a comprehensive empirical analysis of the economics and dynamics behind arbitrages between centralized and decentralized exchanges (CEX-DEX) on Ethereum. We refine heuristics to identify arbitrage transactions from on-chain data and introduce a robust empirical framework to estimate arbitrage revenue without knowing traders’ actual behaviors on CEX. Leveraging an extensive dataset spanning 19 months from August 2023 to March 2025, we estimate a total of 233.8M USD extracted by 19 major CEX-DEX searchers from 7,203,560 identified CEX-DEX arbitrages. Our analysis reveals increasing centralization trends as three searchers captured three-quarters of both volume and extracted value. We also demonstrate that searchers’ profitability is tied to their integration level with block builders and uncover exclusive searcher-builder relationships and their market impact. Finally, we correct the previously underestimated profitability of block builders who vertically integrate with a searcher. These insights illuminate the darkest corner of the MEV landscape and highlight the critical implications of CEX-DEX arbitrages for Ethereum’s decentralization.

Complexity vs Empirical Score

  • Math Complexity: 3.5/10
  • Empirical Rigor: 6.0/10 (capped from 8.0: no out-of-sample test; see penalty flags)
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper relies primarily on large-scale empirical data analysis, heuristics, and statistical estimation, with minimal heavy theoretical derivations or formulas. It demonstrates high empirical rigor through extensive data collection (19 months), detailed methodology for transaction identification, and concrete profit/loss calculations.

Research Flowchart

  flowchart TD
  A["Research Goal:<br>Quantify CEX-DEX arb economics & searcher profitability"] --> B["Methodology: Empirical on-chain analysis"]
  B --> C["Data: 19 months on Ethereum (Aug 2023 - Mar 2025)"]
  C --> D["Identification: Refined heuristics for CEX-DEX arb txs"]
  D --> E["Computation: Estimate revenue without CEX trade data"]
  E --> F["Analysis: Searcher concentration & builder relationships"]
  F --> G["Key Findings:<br>• $233.8M extracted by 19 searchers<br>• Top 3 searchers capture 75% volume<br>• Vertical integration boosts builder profitability<br>• Exclusive searcher-builder relationships exist"]

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1 of 96 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.