# Cyclic Arbitrage in Decentralized Exchanges

arXiv: https://arxiv.org/abs/2105.02784 · HTML: https://mlsanity.com/paper/2105.02784/

## Key facts

- Cited by 4 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 21 Apr 2021.

## Built on by (most cited first, 4 of 4)

- [Detecting Financial Bots on the Ethereum Blockchain](https://mlsanity.com/paper/2403.19530/) (2024)
- [DMind-3: A Sovereign Edge--Local--Cloud AI System with Controlled Deliberation and Correction-Based Tuning for Safe, Low-Latency Transaction Execution](https://mlsanity.com/paper/2602.11651/) (2026)
- [If It Walks Like an Arbitrage: Protocol-Agnostic Detection with Decidable Structural Equivalence](https://mlsanity.com/paper/2608.20377/) (2026)
- [EVAGE: Autonomous MEV Generation and Adaptation via Multi-Agent Harness](https://mlsanity.com/paper/2609.27424/) (2026)

## Abstract (arXiv)

Decentralized Exchanges (DEXes) enable users to create markets for exchanging any pair of cryptocurrencies. The direct exchange rate of two tokens may not match the cross-exchange rate in the market, and such price discrepancies open up arbitrage possibilities with trading through different cryptocurrencies cyclically. In this paper, we conduct a systematic investigation on cyclic arbitrages in DEXes. We propose a theoretical framework for studying cyclic arbitrage. With our framework, we analyze the profitability conditions and optimal trading strategies of cyclic transactions. We further examine exploitable arbitrage opportunities and the market size of cyclic arbitrages with transaction-level data of Uniswap V2. We find that traders have executed 292,606 cyclic arbitrages over eleven months and exploited more than 138 million USD in revenue. However, the revenue of the most profitable unexploited opportunity is persistently higher than 1 ETH (4,000 USD), which indicates that DEX markets may not be efficient enough. By analyzing how traders implement cyclic arbitrages, we find that traders can utilize smart contracts to issue atomic transactions and the atomic implementations could mitigate users' financial loss in cyclic arbitrage from the price impact.