Short Paper: Atomic Execution is Not Enough for Arbitrage Profit Extraction in Shared Sequencers

TL;DR

This paper investigates whether atomic execution in shared sequencers enhances arbitrage profits in rollups, finding that it does not always lead to gains and can sometimes cause losses, challenging assumptions about its benefits.

Contribution

The study develops a model to evaluate arbitrage profits under atomic execution in shared sequencing, revealing limitations and scenarios where it may be detrimental.

Findings

Atomic execution does not always increase arbitrage profits.

Shared sequencing can lead to losses in certain scenarios.

Atomicity alone may not incentivize adoption by arbitrageurs or rollups.

Abstract

There has been a growing interest in shared sequencing solutions, in which transactions for multiple rollups are processed together. Their proponents argue that these solutions allow for better composability and can potentially increase sequencer revenue by enhancing MEV extraction. However, little research has been done on these claims, raising the question of understanding the actual impact of shared sequencing on arbitrage profits, the most common MEV strategy in rollups. To address this, we develop a model to assess arbitrage profits under atomic execution across two Constant Product Market Marker liquidity pools and demonstrate that switching to atomic execution does not always improve profits. We also discuss some scenarios where atomicity may lead to losses, offering insights into why atomic execution may not be enough to convince arbitrageurs and rollups to adopt shared sequencing.