Just-in-Time Resale in an Ahead-of-Time Auction: An Event Study

TL;DR

This paper analyzes how a just-in-time secondary market impacts primary auction dynamics in Arbitrum's Timeboost mechanism, revealing reduced competition and value capture post-adoption of Kairos.

Contribution

It provides the first empirical analysis of how secondary-market emergence affects ahead-of-time primary auctions in blockchain systems.

Findings

Primary auction competition declines significantly after Timeboost adoption.

Paid bids in primary auctions drop to 14.8% of the highest bid post-Kairos.

Total profit-and-loss remains similar despite changes in bid shares.

Abstract

We study Arbitrum's Timeboost mechanism following the adoption of Kairos by its main users -- Wintermute and Selini Capital -- to understand how the emergence of a just-in-time secondary market affects the dynamics of an ahead-of-time primary auction. We find that competition in the primary auction declines significantly and that Arbitrum captures a smaller share of the value generated around Timeboost. After the transition, paid bids in the primary auction correspond to only 14.8\% of the highest bid (compared with nearly 62.7\% in the \textit{Pre-Kairos} era) and to a smaller share of searcher profit-and-loss (PnL), even though total PnL remains of similar magnitude across regimes. While the exact distribution of the remaining surplus between searchers and Kairos remains unclear, the evidence suggests that a substantial share is no longer captured through the primary auction. More broadly, our findings suggest that ahead-of-time allocation mechanisms may be particularly vulnerable to secondary-market intermediation when competition among dominant participants is weak. We conclude by outlining possible ways for Arbitrum to improve revenue capture and discussing how these lessons may apply to Ethereum L1.