Most people in crypto assume that faster blockchains are always better. If transactions confirm instantly, you'd think everything gets smoother and cheaper for everyday users. I recently read a study showing that extreme speed actually comes with unexpected side effects for decentralized exchanges. Speeding things up changes who makes money behind the scenes in ways you wouldn't expect.
The researchers wanted to find out how block speed affects trading performance and liquidity on blockchain exchanges. They analyzed the Base Flashblocks upgrade, which delivered a tenfold block-speed increase to see what really happens. The results showed that priority-fee bids decrease sharply while arbitrageurs see their net profits rise. Active liquidity providers rebalance faster, avoid toxic flow and earn higher profits. At the same time, passive capital shrinks and overall pool depth falls. As a result, effective spreads widen even though prices track external markets more closely.
The study behind all this is Optimal Trading Speed on Blockchain by Ruizhe Jia and Shihao Yu. It lives at arxiv.org/abs/2611.13616 if you feel like reading more. I only tried to make the abstract easier to digest.
This is not financial advice. The information provided is for educational and informational purposes only.
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