We introduce a methodology for empirically evaluating the outcomes of on-chain order flow auctions (OFAs), using price improvement as the key metric and attributing it to factors such as routing efficiency, gas optimization, and priority fee settings. The framework is agnostic to the underlying OFA mechanisms and applies to a broad range of tokens, including those not frequently traded or listed on centralized exchanges (CEXes), enabling comprehensive comparisons of OFA performance. This approach allows for real-world, on-chain evaluations of auction outcomes, providing users with insights into which OFAs perform best and how these improvements are achieved. As an example, we show how the methodology can be applied to 1Inch and Uniswap, demonstrating significant price improvements of 4–5 basis points above the Uniswap router, attributed to added liquidity in large swaps.

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Quantifying Price Improvement in Order Flow Auctions

  • Brad Bachu,
  • Xin Wan,
  • Ciamac C. Moallemi

摘要

We introduce a methodology for empirically evaluating the outcomes of on-chain order flow auctions (OFAs), using price improvement as the key metric and attributing it to factors such as routing efficiency, gas optimization, and priority fee settings. The framework is agnostic to the underlying OFA mechanisms and applies to a broad range of tokens, including those not frequently traded or listed on centralized exchanges (CEXes), enabling comprehensive comparisons of OFA performance. This approach allows for real-world, on-chain evaluations of auction outcomes, providing users with insights into which OFAs perform best and how these improvements are achieved. As an example, we show how the methodology can be applied to 1Inch and Uniswap, demonstrating significant price improvements of 4–5 basis points above the Uniswap router, attributed to added liquidity in large swaps.