Execution Welfare Across Solver-based DEXes
Yuki Yuminaga, Dex Chen, Danning Sui
TL;DR
This paper provides an empirical evaluation of execution welfare for solver-based DEXes (CoWSwap, 1inchFusion, UniswapX) compared to AMMs (Uniswap V2 and V3) using USDC-WETH and PEPE-WETH. It introduces the execution welfare metric $\text{Execution Welfare} = \frac{\text{Solver output amount} - \text{AMM output amount after gas}}{\text{AMM output amount after gas}}$ and employs a top-of-block simulation framework to benchmark solver performance against AMM baselines under similar liquidity conditions. Results show that solver-based DEXes improve execution relative to Uniswap V2, with stronger gains for larger trades and long-tail assets, while advantages over Uniswap V3 are more asset- and size-dependent; liquidity structure (PMM vs AMM) and off-chain liquidity access via RFQ play crucial roles. The study highlights both the potential of solver-based routing to enhance end-user outcomes and the challenges posed by market concentration and fragmented liquidity, providing a foundation for future routing research and design of solver auctions. Limitations include asset scope, snapshot-based simulations, and the absence of full multi-pool routing, suggesting avenues for broader asset coverage and routing-enabled benchmarks.
Abstract
Decentralized exchanges (DEXes) have evolved dramatically since the introduction of Automated Market Makers (AMMs). In recent years, solver-based protocols have emerged as an alternative venue aiming to introduce competition for routing, access to offchain liquidity, and thereby improve end-user execution. Currently, these solver auctions are hosted on opaque backends, and the extent of price improvement they provide to end users remains unclear. We conduct an empirical study of the execution welfare that these protocols bring to users by analyzing data across different asset profiles (USDC-WETH and PEPE-WETH). Our results indicate that, compared to vanilla routing through Uniswap V2 or V3, solver-based protocols effectively enhance execution welfare for end users on DEXes within certain trade size ranges. This effect is most pronounced with USDC-WETH, a short-tail asset, and somewhat less significant with PEPE-WETH, a long-tail asset. Additionally, we identify execution welfare discrepancies across solver-based platforms (e.g., CoWSwap, 1inchFusion, UniswapX), revealing potential inefficiencies due to solver market structure, variations in liquidity profile and inventory depth among solvers. These insights highlight both the advantages and challenges of solver-based trading, underscoring its role in improving execution outcomes while raising concerns about market concentration and competition dynamics.