Price Discovery on Decentralized Exchanges

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Authors: Agostino Capponi, Ruizhe Jia, Shihao Yu
Cited by: 3
References: 27

Abstract

Abstract Decentralized exchanges (DEXs) allow traders to express their willingness to pay for quick execution through a public priority fee bidding mechanism. We provide evidence that high-fee DEX trades are more informative and contribute more to price discovery. Using address-level blockchain transaction data, we show that informed traders persistently bid higher fees to secure early execution, revealing a strong willingness to pay for execution priority. Further, analysis of Ethereum mempool data demonstrates that informed traders employ a “jump bidding” strategy, placing high initial bids to deter potential competitors.

Fields of Study & Subjects

Auction Theory and Applications Blockchain Technology Applications and Security Financial Markets and Investment Strategies

Publication details

Journal / source
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Publication date
14 January 2026
Language
EN