Ethereum arbitrage: builders earn $5.24 per $1 burned, Bitquery finds
In brief
- Bitquery's 30-day study: builders earn $5.24 per $1 burned on Ethereum arbitrage
- Block assembly captured 49.3% of surplus, 9.4% burned, 41.3% to trading operators
- Validator payment opacity obscures true builder profit distribution
How arbitrage works on Ethereum
Arbitrage software looks for a token available at different prices, buys at the cheaper price and sells at the higher one. This activity generates surplus—the difference between purchase and sale prices. Bitquery's study tracked where that surplus flows.
The five-to-one breakdown
Bitquery's allocation puts 49.3% of measured surplus toward block assembly, 9.4% toward burned fees and 41.3% with trading operators. The $5.24-to-$1 ratio reflects this distribution across a 30-day window.
In the block-building arrangement documented by Flashbots, builders gather transactions and bundles, construct blocks, then bid for validators' blockspace through relays. A builder sets its own address as the block's fee recipient, then includes a transaction at the end of the block paying ETH to the proposer's designated recipient.
The profit ambiguity
Bitquery's allocation does not measure the fraction of its builder receipts passed onward to proposers. That gap means the 49.3% attributed to block assembly may include payments later distributed to validators. The actual split between builders and validators—the entities that secure the network—remains opaque.
Ethereum's EIP-1559 specification separates the base fee from the priority fee, with the base fee destroyed by the protocol. Arbitrage transactions consume both. The burned portion ($1 in Bitquery's ratio) exits the system entirely. The builder portion ($5.24) stays within the ecosystem, but its final destination—builders' wallets or validators' rewards—depends on private payment arrangements Bitquery didn't measure.
The five-to-one comparison is calculated from the rounded shares and describes sampled arbitrage surplus, not Ethereum-wide revenue. The findings apply to this specific 30-day window and arbitrage transactions only, not all Ethereum activity or MEV extraction broadly.
Frequently asked questions
What is arbitrage on Ethereum?
Arbitrage software identifies tokens trading at different prices across venues, buys at the cheaper price, and sells at the higher one. This activity generates surplus that flows to builders, validators, and the protocol itself.
Why doesn't the $5-to-$1 ratio show the full profit picture?
Builders receive $5.24 per $1 burned, but they also pay validators separately to propose blocks. Bitquery's data doesn't measure how much of the builder receipts flow onward to validators, so the final profit split remains unclear.
What happens to the burned $1?
Ethereum's EIP-1559 specification separates base fees from priority fees. The base fee is destroyed by the protocol and exits the system entirely, while builder receipts stay within the ecosystem but may be shared with validators.
