Arbitrageur Profitability

Arbitrageur profitability is derived from exploiting price discrepancies between decentralized liquidity pools and external markets. When a trade in a pool pushes the internal price away from the global market price, arbitrageurs step in to buy low and sell high, or vice versa.

This action brings the pool price back to equilibrium and is essential for the accuracy of decentralized price discovery. Their profit is the difference between the price at which they trade in the pool and the price at which they offset the trade on another exchange.

While they capture value from liquidity providers, their role is vital for the health of the decentralized ecosystem. Their activity is a primary indicator of market efficiency.