Why Is Arbitrage Essential for the Health and Functionality of Decentralized Exchanges? ⎊ Path

Why Is Arbitrage Essential for the Health and Functionality of Decentralized Exchanges?

Arbitrage is essential because it is the mechanism that ensures the prices within the decentralized exchange (DEX) pool remain consistent with the broader market price. Without arbitrage, a DEX could have wildly inaccurate prices, making it useless for traders and susceptible to manipulation.

Arbitrageurs act as automatic price-correcting agents, ensuring that the DEX offers fair market rates, which maintains the health of the liquidity pools and the overall functionality of the exchange.

What Is the Potential Impact of Validator Collusion on the Fairness of Transaction Ordering?

How Does Token Distribution Affect the Decentralization and Fairness of a DeFi Community?

What Mechanism Ensures the Randomness and Fairness of Validator Selection?

What Metrics Indicate the Health of a DEX’s User Base and Liquidity?

What Is an Arbitrageur’s Role in Maintaining the X Y=k Constant in an AMM?

How Does MEV Affect the Fairness of the Fee Market?

What Is the Impact of Socialized Losses on Trader Confidence and Market Fairness?

What Is the Role of an Exchange’s Matching Engine in Ensuring Market Fairness?