Arbitrage

Arbitrage is buying an asset where it's cheaper and simultaneously selling it where it's more expensive to capture the spread. In traditional markets the opportunities are tiny and picked off in microseconds by HFT firms; the interesting action is in venues with fragmented liquidity. On-chain arbitrage is a whole industry now: bots watch every DEX across every L2, plus CEX orderbooks, and fire off transactions (often funded by flash loans) the moment a price gap exceeds gas costs. The economically important part: arbitrage is the mechanism that keeps prices coherent across venues — without arbitrageurs, a token could trade at $100 on Uniswap and $105 on Curve indefinitely. They're the reason the ecosystem acts like one market instead of a hundred disconnected ones. Much of MEV extraction is technically arbitrage.