CEX–DEX arbitrage tries to capture a temporary price difference for the same cryptoasset by buying on one venue and selling on the other. A centralized exchange (CEX) normally matches orders in an off-chain order book; a decentralized exchange (DEX) commonly prices swaps against an automated-market-maker (AMM) pool and settles the transaction on a blockchain. Because those two legs have different fees, execution mechanics, settlement delays and risks, a spread visible on a screen is only a candidate opportunity—not proof of profit.
The correct test is whether executable proceeds from both legs still exceed every cost: trading fees, bid–ask spread, pool fees, gas, price impact, slippage, failed transactions, transfers or rebalancing, and the cost of holding inventory. No reviewed study establishes a universal net return for an individual trader.
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How CEX–DEX arbitrage works
An arbitrageur looks for a price discrepancy between a CEX order book and a DEX pool, then attempts to take both sides before the prices converge. The trade may be structured as buying the asset on the cheaper venue and selling it on the more expensive one, or the reverse. Ideally, both orders are submitted nearly together so that a market move does not leave only one leg filled.
What happens on a CEX
A CEX generally maintains an order book and matches orders inside its own systems. Execution can be very fast, but the fill depends on available bids or offers at each price level. The apparent best price may be too small for the intended order, so the actual average fill can be worse. Assets remain under the venue’s custody until withdrawn, and a transfer to another venue is a separate operation.
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What happens on a DEX
A DEX commonly uses an AMM pool. Your swap changes the pool’s asset balances, so the execution price changes with trade size and available liquidity. The transaction must be submitted to a blockchain, included in a block and confirmed according to that chain’s rules. A quoted amount can therefore change before inclusion, and a transaction can fail or revert while still consuming some costs, depending on the protocol and network.
The structural comparison
| Dimension | Centralized exchange | Decentralized exchange |
|---|---|---|
| Trading mechanism | Usually an order book with venue-managed matching and execution | Usually an AMM pool whose price responds to trade size and pool liquidity |
| Main explicit costs | Trading fee, bid–ask spread and adverse execution | Pool fee, gas, price impact and slippage |
| Timing and settlement | Venue execution may be rapid; withdrawals and cross-venue transfers are separate | Transaction inclusion and blockchain settlement add latency and uncertainty |
| Key exposures | Custody and counterparty exposure, execution risk and inventory risk | Smart-contract and chain risk, gas volatility, transaction ordering and price impact |
| Potential operational advantage | Deep liquidity and rapid execution on major venues | Non-custodial interaction, relative pseudonymity and interoperability with DeFi applications |
These are tendencies rather than guarantees. Costs and execution vary with the venue, chain, asset, order size, liquidity and market conditions, so neither venue type is a permanent winner.
Why a displayed spread is not a profit
Screens often compare a last-traded price or a top-of-book quote with a DEX quote. Arbitrage requires executable prices for the full intended size. The CEX order may consume several order-book levels; the DEX swap may move the pool price; and the blockchain transaction may be delayed until the gap disappears.
Use a proceeds calculation for the exact direction of the trade. For a buy-on-DEX, sell-on-CEX example:
Net result = CEX sale proceeds − DEX purchase cost
− CEX trading fee and spread cost
− DEX pool fee and gas
− DEX price impact and slippage
− failed-transaction costs
− transfer, rebalancing and inventory costsFor the opposite direction, reverse the venues but keep every applicable term. Use the actual taker or maker rate for the account, the expected average fill rather than the headline quote, and a realistic gas estimate for the chosen chain. If a cost cannot be estimated, treat the trade as unverified rather than assuming it is zero.
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A practical execution workflow
- Capture executable quotes. Record the CEX depth for the complete order and the DEX quote for the exact input amount, including the pool fee and quoted minimum output.
- Choose the direction. Identify which venue is cheaper to buy on and which is more expensive to sell on. Confirm that the asset and network representations are the same and can actually be settled against each other.
- Model every cost. Add venue fees, spread or order-book depth, pool fee, gas, price impact, slippage tolerance, possible failed-transaction expense, and the funding or rebalancing cost.
- Check liquidity and limits. Look for thin order books, shallow pools, withdrawal limits, deposit delays and token-specific transfer restrictions. A theoretical spread that cannot be filled at the intended size is not an opportunity.
- Check timing and inclusion. Estimate CEX response time, blockchain congestion, current gas bids and the probability that the DEX transaction is included before the spread closes.
- Submit both legs with safeguards. Use an order type and size that limit unacceptable price movement. On the DEX, set a slippage limit consistent with the modeled edge; on the CEX, avoid assuming the displayed top level will remain available.
- Verify settlement. Confirm the CEX fill, the on-chain transaction status and the final amounts received. A broadcast transaction is not the same as a confirmed swap.
- Reconcile and rebalance. Update balances, fees and inventory after both legs. Rebalancing transfers can be expensive or slow, so include them in the strategy’s measured result.
Where the money goes: a complete cost model
| Cost or exposure | What to measure | Why it matters |
|---|---|---|
| CEX trading fee | The account’s current maker or taker rate for the actual order | A small displayed spread can disappear immediately after this charge |
| CEX spread and depth | Average fill across all consumed order-book levels | Large orders rarely execute entirely at the best quoted price |
| DEX pool fee | The pool’s fee tier for the selected route | It is charged on the swap even when the price moves favorably |
| Gas | Network fee needed for submission and inclusion, plus any replacement or failed-transaction expense | It behaves like a relatively fixed cost, so it weighs heavily on small trades |
| Price impact | The pool-price movement caused by your own swap | It increases with order size and decreases with effective pool liquidity |
| Slippage | The difference between the quote and the amount actually executed | Other trades, latency and volatile reserves can worsen the fill |
| Transfer and rebalancing | Network withdrawal, deposit and bridge charges, plus waiting time | Moving funds after each trade can consume the apparent edge |
| Inventory funding | Capital tied up on both venues and the cost of price movements while it is held | Pre-funding improves speed but creates directional exposure |
There is no universal fee schedule that makes a CEX or DEX cheaper. A meaningful comparison must state the current venue, chain, asset and trade size. Fees can change with account tier, pool route, congestion and market state.
How trade size changes the cost mix
Gas is comparatively insensitive to the notional amount, while price impact and slippage rise with size relative to available liquidity. The result is a changing break-even point.
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- Small swaps: In a study of sampled Uniswap swaps, trades below $1,000 paid more than 98% of total transaction cost as gas. Austin Adams, Benjamin Y. Chan, Sarit Markovich and Xin Wan report this result in their 2023 preprint, not as a universal figure for every chain or current pool: “Don’t Let MEV Slip: The Costs of Swapping on the Uniswap Protocol”.
- Large swaps: In the same study sample, swaps above $100,000 had price impact and slippage accounting for approximately 77% of total transaction cost per dollar. The finding is specific to the authors’ sampled Uniswap pools and period.
- Broader market evidence: A 2026 Management Science study finds that gas places a significant burden on relatively small trades and that DEX transaction costs can be more competitive for larger trades. Those are study results, not a live quote or a guarantee for a particular network: Barbon and Ranaldo, “On the Quality of Cryptocurrency Markets: Centralized vs. Decentralized Exchanges”.
Before sending a trade, calculate the break-even notional at which the expected edge covers fixed gas and other charges. Recalculate it when congestion, pool liquidity or the intended size changes.
MEV and the race for inclusion
DEX arbitrage is visible to transaction-ordering infrastructure, so other searchers can compete for the same discrepancy. Ethereum.org calls DEX arbitrage “the simplest and most well-known MEV opportunity” and says it is consequently “the most competitive”: Maximal extractable value (MEV).
Searchers may raise gas bids or use private transaction channels to increase the chance of inclusion. Ethereum.org gives an illustrative high-competition case in which searchers may pay “90% or even more” of MEV revenue in gas. That is not an average cost; it shows how competition can consume nearly all of a nominal opportunity. Earlier work documents priority gas auctions and transaction reordering in decentralized exchanges: Daian et al., “Flash Boys 2.0”.
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Competition also creates front-running and sandwiching concerns. A transaction that reveals a profitable swap can be reordered or surrounded by other transactions, changing the final price. Slippage limits reduce the amount you are willing to accept, but they cannot guarantee inclusion or profitability.
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Latency, settlement and inventory risk
Latency between the legs
A CEX can acknowledge an order quickly while the DEX leg waits for a block. During that interval, the spread can narrow or reverse. A successful CEX fill paired with a delayed, failed or partially executed DEX swap leaves directional exposure rather than a hedged arbitrage.
Pre-funding versus transferring
Keeping assets and quote currency on both venues avoids waiting for a deposit before every trade. The trade-off is inventory risk: prices can move while balances sit idle, and capital is tied up in two systems. Transferring only after a trade reduces idle balances but introduces withdrawal fees, confirmation delays, network outages and possible deposit holds.
Research using Binance and Uniswap V2 data reports positive inventory risk and relationships among price discrepancies, liquidity and gas fees. The result comes from a 2026 preprint and should not be read as a forecast for every strategy: He, Yang and Zhou, “Arbitrage on Decentralized Exchanges”.
Rebalancing is part of the strategy
After repeated trades, one venue may accumulate the asset while the other accumulates cash. A strategy that reports only the two initial fills can look profitable while its next trade requires an expensive transfer. Track balances by venue and include the periodic cost and risk of restoring the desired inventory mix.
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Liquidity, price impact and market structure
On an order book, executable liquidity is the quantity available at each price level. In an AMM, the pool’s reserves determine how far the price moves along the curve. Low-liquidity tokens constrain trade size and increase price impact, a relationship also reported in CEX–DEX research.
The Bank for International Settlements gives a concrete historical example: the relative bid–ask spread for Tether–ETH on a popular DEX was reported as up to 30 basis points wider than on a CEX. That observation comes from its 2022 report and is not a current universal comparison: “DeFi risks and the decentralisation illusion”.
Decentralized market structures can therefore provide access and composability while imposing a larger execution penalty for a particular size. Compare effective, size-adjusted prices—not nominal quotes—and test both directions of the trade.
Custody, protocol and chain exposure
| Exposure | CEX leg | DEX leg |
|---|---|---|
| Who controls settlement? | The venue records and settles the trade internally; withdrawals depend on its systems and policies | Your wallet signs a smart-contract transaction, but finality depends on the blockchain |
| Failure mode | Venue outage, withdrawal suspension, account restriction or counterparty failure | Contract bug, exploitable approval, chain halt, reorganization or failed transaction |
| Information and ordering | Matching occurs inside the venue and is not directly visible on-chain | Transaction data can expose the trade to ordering competition |
| Operational burden | Account security, permissions, limits and custody controls | Wallet security, gas management, contract verification and network selection |
Neither column is risk-free. The Bank for International Settlements also highlights validator concentration and potential front-running concerns in decentralized finance. Treat a DEX interaction as a smart-contract and infrastructure decision, not merely a cheaper order type.
How to judge profitability and measure results
Published evidence does not support a typical retail net-profit number after all costs. The specialized studies examine particular venues, assets, periods and execution assumptions. A trader’s result additionally depends on capital, automation, latency, order size, failed attempts and rebalancing.
Measurement is difficult because the DEX leg is visible on-chain while the CEX execution is off-chain. The 2025 study “Measuring CEX-DEX Extracted Value and Searcher Profitability: The Darkest of the MEV Dark Forest” develops a framework to estimate the missing side rather than observing complete trader profit directly. Do not equate on-chain arbitrage revenue with realized, net CEX–DEX returns.
That study uses 19 months of data, from August 2023 through March 2025. It reports that the trades examined can use less than 2% of block space while contributing more than 15% of total block value, based on its analysis and cited prior work. These figures describe that study’s scope and measurement, not the share or value of every arbitrage market.
A record-keeping checklist
- Timestamp and market state for both quotes
- Order-book levels consumed and final CEX fill
- DEX route, pool, quoted output, actual output and transaction hash
- Gas paid, replacement transactions and any reverted calls
- All venue, withdrawal, bridge and rebalancing charges
- Inventory before and after each pair of trades
- Whether both legs were fully executed and settled
Calculate realized net proceeds only after the pair is settled and the inventory effect is accounted for. Keep theoretical opportunity, submitted trade and completed trade as separate categories.
A decision framework for choosing a path
Use the following questions for each candidate, rather than asking whether CEXs or DEXs are cheaper in the abstract:
- Can the full size execute? Compare CEX depth and DEX pool liquidity at the intended notional.
- What is the effective all-in cost? Include every row in the cost table and use current values.
- Will timing erase the edge? Account for block inclusion, confirmations, CEX response and transfer delays.
- How will balances be funded? Decide whether pre-funding or post-trade transfers produce lower total risk and cost.
- What can fail? Identify venue outages, contract permissions, chain congestion, reverts and partial fills before submitting.
- Is the evidence measurable? If the CEX leg, inventory or rebalancing cannot be reconciled, label the result as an estimate rather than profit.
A CEX–DEX route may be operationally sensible for a sufficiently large, liquid trade when the modeled edge comfortably exceeds gas and execution uncertainty. The same route can be uneconomic for a small swap or a shallow pool. The answer must be recomputed for the specific asset, venues, chain, size and market state.
Bottom line
CEX–DEX arbitrage is a cross-venue execution problem, not a simple price comparison. CEX order-book liquidity, DEX price impact, gas, MEV competition, settlement latency, inventory and custody risks all determine the result. Treat every displayed spread as a hypothesis; trade only when executable, size-specific proceeds remain positive after the complete cost and risk calculation.
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