How Do Gas Fees on Decentralized Exchanges (DEXs) Impact DeFi Arbitrage?
Gas fees, the cost of executing a transaction on a blockchain like Ethereum, are a significant execution cost for DeFi arbitrage. These fees can be highly volatile and unpredictable.
An arbitrage opportunity must be large enough to cover the gas fee, which can be substantial during network congestion. Failed transactions still incur gas fees, leading to losses.
Arbitrageurs use sophisticated gas-estimation models.
Glossar
Gas Fees
Mechanism ⎊ Gas fees represent the computational cost required to execute transactions or smart contracts on a blockchain network, particularly Ethereum and its Layer-2 solutions, functioning as a deterrent against denial-of-service attacks and a reward for network validators.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.
Failed Transactions
Resolution ⎊ Failed transactions, within cryptocurrency and derivatives markets, represent instances where an intended order or operation does not achieve its intended state due to systemic or individual constraints.