Skip to content
All library documents

Measuring Price Improvement in Onchain Order Flow Auctions

Article arXiv papers · Author: Brad Bachu et al.
Read the original

Summary

The document presents a framework for measuring price improvement from onchain order flow auctions (OFAs). It describes attributing execution gains to adjustable system inputs, including route quality, gas use, and priority fee settings, with the goal of separating auction effects from other sources of better fills.

Applied to Ethereum trading interfaces including 1Inch and Uniswap, the analysis reports statistically significant gains averaging 4–5 basis points in its sample. It attributes the improvement mainly to extra liquidity available for large swaps. The excerpt gives no sample size, period, transaction breakdown, or detail on statistical tests, so the reported average should be treated as specific to the studied interfaces and data rather than a general guarantee.

Key ideas

  • The framework evaluates onchain order flow auctions by measuring price improvement.
  • It attributes execution outcomes to routing, gas optimization, and priority fee choices.
  • The studied interfaces showed average improvements of 4–5 basis points in the sample.
  • The analysis links the gains chiefly to added liquidity for large swaps.

Tags

CryptoOn-chain dataExecutionMarket microstructureDeFi
Full text
# Quantifying Price Improvement in Order Flow Auctions


# Quantifying Price Improvement in Order Flow Auctions









This work introduces a framework for evaluating onchain order flow auctions (OFAs), emphasizing the metric of price improvement. Utilizing a set of open-source tools, our methodology systematically attributes price improvements to specific modifiable inputs of the system such as routing efficiency, gas optimization, and priority fee settings. When applied to leading Ethereum-based trading interfaces such as 1Inch and Uniswap, the results reveal that auction-enhanced interfaces can provide statistically significant improvements in trading outcomes, averaging 4-5 basis points in our sample. We further identify the sources of such price improvements to be added liquidity for large swaps. This research lays a foundation for future innovations in blockchain based trading platforms.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.