Zero Fees Maximize DeFi Arbitrage Value, Study Finds

A new study from the MEV-X research team reveals that decentralized finance (DeFi) markets are constantly dislocated at the micro level, creating opportunities for arbitrageurs to profit.

The researchers found that almost every swap on a decentralized exchange leaves a small mark behind - a price gap between the pool's price and the wider market rate. This mispricing creates dislocation value, which is maximized when a pool charges zero fees on arbitrage trades.

Constant-product AMMs like Uniswap V2 can theoretically capture up to 50% of dislocation value through fees, but in practice, they often fall short of even that. By using AMM hooks, pools can execute internal arbitrage at the atomic level, securing untapped value and reducing MEV leakage.

Retail traders continue paying normal swap fees, while the pool's own rebalancing trade runs fee-free. This internal correction step undoes part of the price divergence created by the original swap, depending on the depth of the reference pool and the fee charged.