Price Discovery on Decentralized Exchanges
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