Second Thoughts: How 1-second subslots transform CEX-DEX Arbitrage on Ethereum

TL;DR

Reducing Ethereum's slot time from 12 seconds to 1 second significantly boosts arbitrage activity and volume between centralized and decentralized exchanges by decreasing execution risk and increasing risk-adjusted returns.

Contribution

This paper introduces a trading model accounting for execution risk in arbitrage and demonstrates how faster slot times substantially enhance arbitrage activity on Ethereum.

Findings

Arbitrage transaction count increases by 535% with 1-second subslots.

Trading volume rises by 203% under faster slot times.

Reduced variance in trade outcomes makes arbitrage more attractive.

Abstract

This paper examines the impact of reducing Ethereum slot time on decentralized exchange activity, with a focus on CEX-DEX arbitrage behavior. We develop a trading model where the agent's DEX transaction is not guaranteed to land, and the agent explicitly accounts for this execution risk when deciding whether to pursue arbitrage opportunities. We compare agent behavior under Ethereum's default 12-second slot time environment with a faster regime that offers 1-second subslot execution. The simulations, calibrated to Binance and Uniswap v3 data from July to September 2025, show that faster slot times increase arbitrage transaction count by 535% and trading volume by 203% on average. The increase in CEX-DEX arbitrage activity under 1-second subslots is driven by the reduction in variance of both successful and failed trade outcomes, increasing the risk-adjusted returns and making CEX-DEX arbitrage more appealing.