# A Two-Asset AMM Model Examines Fees and Arbitrage Profits

By Enna Lee

Canonical URL: https://www.tokenpost.com/news/investing/27095
Published: 2026-10-06T16:51:12.000Z
Updated: 2026-10-06T16:51:12.000Z
Section: Investing

> The analysis finds that, when fees are low and blocks are generated rapidly, fees scale down arbitrage profits based on how often a trade is profitable.

A model of a two-asset automated market maker finds that, when fees are low and blocks are generated rapidly, fees reduce arbitrage profits in proportion to how often arriving traders can make profitable trades.

In the model, arbitrageurs can trade only when blocks are generated. They profit when the AMM's price differs enough from the broader market price to overcome the fee.

The analysis treats arbitrage profits as a cost to liquidity providers, who supply assets to AMM pools. In the fast-block setting, it estimates that fees scale down those profits by the share of time an arriving arbitrageur finds a profitable trade.