AMM Arbitrage

AMM arbitrage is the specific practice of identifying and correcting price discrepancies between an automated market maker and other trading venues. Because AMMs update their prices based on a mathematical formula rather than an external order book, they often lag behind the broader market.

Arbitrageurs take advantage of this delay to buy or sell assets at a profit, simultaneously bringing the AMM price into alignment with the market. This process is essential for the accuracy of AMM pricing and the overall efficiency of the decentralized ecosystem.

It is a highly competitive and technical field, often requiring the use of sophisticated bots and flash loans. It ensures that users of AMMs receive fair and competitive prices.