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

Arbitrage ensures DEX prices align with the external market, preventing manipulation and maintaining the exchange's functionality and fairness.
Greeks.Live21.11.25

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.

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