Measuring CEX-DEX Extracted Value and Searcher Profitability: The Darkest of the MEV Dark Forest

2025-07-17

AI Summary

This paper addresses the challenge of quantifying centralized exchange–decentralized exchange (CEX-DEX) arbitrage value extraction on Ethereum, for which off-chain CEX trading data is typically required. We propose the first empirical framework that relies solely on on-chain data, eliminating dependence on external CEX feeds. By enhancing heuristic identification techniques, we conduct a large-scale analysis of 19 months of Ethereum transaction data, identifying 7.2 million arbitrage transactions. We estimate that 19 prominent searchers collectively extracted $233.8 million in value, with the top three accounting for 75% of the total. Our study provides the first empirical evidence of extreme concentration in the arbitrage market and demonstrates deep coordination between searchers and block builders—significantly influencing transaction ordering and profit distribution. These findings offer critical insights into the economic structure of maximal extractable value (MEV), highlight systemic centralization risks, and establish a methodological foundation for governance design in decentralized protocols.

Technology Category

• Game Theory and Economic Paradigms: Mechanism Design
• Multiagent Systems: Mechanism Design
• Search and Optimization: Distributed Search

Application Category

• Economics, Online Markets and Human Computation: Trust and reliance of crowd workers and data experts on GenAI
• Web Mining and Content Analysis: Bridging structured and unstructured data
• Search and Retrieval-Augmented AI: Web evaluation methodologies and metrics

Abstract

This paper provides a comprehensive empirical analysis of the economics and dynamics behind arbitrages between centralized and decentralized exchanges (CEX-DEX) on Ethereum. We refine heuristics to identify arbitrage transactions from on-chain data and introduce a robust empirical framework to estimate arbitrage revenue without knowing traders' actual behaviors on CEX. Leveraging an extensive dataset spanning 19 months from August 2023 to March 2025, we estimate a total of 233.8M USD extracted by 19 major CEX-DEX searchers from 7,203,560 identified CEX-DEX arbitrages. Our analysis reveals increasing centralization trends as three searchers captured three-quarters of both volume and extracted value. We also demonstrate that searchers' profitability is tied to their integration level with block builders and uncover exclusive searcher-builder relationships and their market impact. Finally, we correct the previously underestimated profitability of block builders who vertically integrate with a searcher. These insights illuminate the darkest corner of the MEV landscape and highlight the critical implications of CEX-DEX arbitrages for Ethereum's decentralization.

Problem

• Analyzing CEX-DEX arbitrage economics and dynamics on Ethereum
• Estimating arbitrage revenue without CEX trader behavior data
• Investigating centralization trends in MEV and searcher profitability

Innovation

• Refined heuristics for arbitrage transaction identification
• Robust framework estimating revenue without CEX behavior data
• Uncovered exclusive searcher-builder relationships and market impact