Routing Frictions and Executable Liquidity in Fragmented Markets
Abstract
Public blockchains can make many trading venues simultaneously visible and mechanically reachable, yet an order still has to pay to activate each additional venue: technological connectivity need not translate into economically integrated execution. Automated-market-maker (AMM) pools make this gap directly measurable, because exact pre-trade venue states, transaction-level routing costs, and realized venue use can be reconstructed jointly from public blockchain records. Using 13,768 sampled family-transactions from 29 Ethereum and Base token-pair families and 71 sibling pools, we document a sharp compression from gross to net execution opportunity: the equal-chain lower bound on gross multi-venue gains is 34.85%, while the corresponding upper bound after measured access costs is 6.89%, as access costs eliminate 80.45% of point-identified states with positive gross gains. Realized routing shows a distinct second contrast: actual multi-pool activation occurs in only 1.203% of the opportunity population, yet among 170 eligible realized integrated routes, observed allocation captures 94.8% of aggregate feasible gain. Holding recipient orders and exact venue states fixed, replacing the Ethereum routing-cost regime with Base's lower-cost regime materially expands executable integration under both state populations. For digital-market design, the results imply that blockchain scaling, cross-venue connectivity, and displayed liquidity do not by themselves establish economically integrated execution: integration is an order-specific property that depends on transaction-level access costs.
Related
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- Variance and volatility swap valuation with nonlinear liquidity-feedback stochastic volatility and regime switching
- Frequency Structure of AMM Liquidity Pools: A Multiresolution Analysis of Regime Transitions
- Liquidity-Constrained Annuitization with Shifted-Power Preferences
BibTeX
@misc{wang2026routing,
title = {{Routing Frictions and Executable Liquidity in Fragmented Markets}},
author = {Wen-Ting Wang},
howpublished = {arXiv},
year = {2026},
month = sep,
doi = {10.48550/arxiv.2609.19013},
eprint = {2609.19013},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2609.19013},
note = {CC BY 4.0},
}
RIS
TY - UNPB
TI - Routing Frictions and Executable Liquidity in Fragmented Markets
AU - Wen-Ting Wang
PY - 2026
DA - 2026/09/17
PB - arXiv
DO - 10.48550/arxiv.2609.19013
UR - https://arxiv.org/abs/2609.19013
AB - Public blockchains can make many trading venues simultaneously visible and mechanically reachable, yet an order still has to pay to activate each additional venue: technological connectivity need not translate into economically integrated execution. Automated-market-maker (AMM) pools make this gap directly measurable, because exact pre-trade venue states, transaction-level routing costs, and realized venue use can be reconstructed jointly from public blockchain records. Using 13,768 sampled family-transactions from 29 Ethereum and Base token-pair families and 71 sibling pools, we document a sharp compression from gross to net execution opportunity: the equal-chain lower bound on gross multi-venue gains is 34.85%, while the corresponding upper bound after measured access costs is 6.89%, as access costs eliminate 80.45% of point-identified states with positive gross gains. Realized routing shows a distinct second contrast: actual multi-pool activation occurs in only 1.203% of the opportunity population, yet among 170 eligible realized integrated routes, observed allocation captures 94.8% of aggregate feasible gain. Holding recipient orders and exact venue states fixed, replacing the Ethereum routing-cost regime with Base's lower-cost regime materially expands executable integration under both state populations. For digital-market design, the results imply that blockchain scaling, cross-venue connectivity, and displayed liquidity do not by themselves establish economically integrated execution: integration is an order-specific property that depends on transaction-level access costs.
ER -