2.7 KiB
Scaling and competitive reality (reference)
Last Updated: 2026-04-13
Document Version: 1.0
Status: Reference
This compresses “what scales” and “what bites” for teams sizing MEV and arbitrage infrastructure. It is not a revenue forecast.
What scales (qualitatively)
| Pattern | Scales under competition? | Notes |
|---|---|---|
| Simple two-pool DEX arb | Usually poorly | Commoditized; margins often near gas |
| Triangular / multi-hop | Mixed | Limited by weakest leg; search cost grows |
| Backruns (mempool-visible flow) | Often better | High frequency; outcome dominated by simulation + execution |
| Sandwiching | Mixed (and often excluded by policy) | High per-trade upside when it works; protections, reverts, and ethics matter |
| Liquidations | Bursty | Large per-event when volatility spikes; protocol-specific |
| Cross-chain | Mixed | Capital and bridge latency bound scale |
| Oracle lag | Rare | High impact episodes; requires deep protocol knowledge |
Top teams typically run a multi-strategy portfolio (detection + simulation + execution shared), rather than a single “arb bot.”
Hard constraints
- Near zero-sum extraction against unsophisticated flow or passive LPs: your profit is often someone else’s worse execution or lower returns.
- Competitors include specialized firms with dedicated data, execution, and builder relationships.
- Edge decays as more capital and automation chase the same signals.
- Operational risk: reorgs, relay failures, buggy adapters, key compromise, and regulatory attention (especially user-harming strategies).
Detection funnel (intuition)
- Many raw signals per second (logs, mempool hints, block diffs).
- Some survive simulation as technically valid.
- Few remain profitable after gas, tips, and failure probability.
- Fewer still win the ordering auction against peers.
Framing the system as winning blockspace under uncertainty matches production more closely than “find positive arb.”
Relation to implementation work
Building a reliable internal platform (indexing, deterministic simulation, bundle lifecycle, observability) is valuable even when public mempool alpha is thin: the same components support risk management, internal routing, testing, and incident replay.
For build scope and safety gates, follow MEV_Bot/specs/MVP_SCOPE.md and MEV_Bot/specs/OBSERVABILITY_SAFETY_AND_ROLLOUT.md in the proxmox parent submodule.