An Empirical Study of Cross-Chain Arbitrage in Decentralized Exchanges

Blockchain interoperability refers to the ability of blockchains to share information with each other. Decentralized Exchanges (DEXs) are peer-to-peer marketplaces where traders can exchange cryptocurrencies. Several studies have focused on arbitrage analysis within a single blockchain, typically in Ethereum. Recently, we have seen a growing interest in cross-chain technologies to create a more interconnected blockchain network. We present a framework to study cross-chain arbitrage in DEXs. We use this framework to analyze cross-chain arbitrages between two popular DEXs, PancakeSwap and QuickSwap, within a time frame of a month. While PancakeSwap is implemented on a blockchain named BNB Chain, QuickSwap is implemented on a different blockchain named Polygon. The approach of this work is to study the cross-chain arbitrage through an empirical study. We refer to the number of arbitrages, their revenue as well as to their duration. This work lays the basis for understanding cross-chain arbitrage and its potential impact on the blockchain technology.