Just-in-Time Resale in an Ahead-of-Time Auction: An Event Study
2026-03-20 • Computer Science and Game Theory
Computer Science and Game Theory
AI summaryⓘ
The authors study how Arbitrum’s Timeboost system changed after major users started using a new secondary market called Kairos. They found that the main auction, which happens before the secondary market, became less competitive and made less money for Arbitrum. Even though the total profit from trading stayed about the same, most of the extra value shifted to the secondary market instead of the auction. The authors suggest ways Arbitrum could change its auction to get more value back in the future.
ArbitrumTimeboostKairosprimary auctionsecondary marketCEX-DEX arbitrageprofit-and-loss (PnL)reserve priceauction design
Authors
Burak Öz, Christoph Schlegel, Akaki Mamageishvili
Abstract
We study Arbitrum's Timeboost mechanism following the adoption of Kairos by its main users -- Wintermute and Selini Capital -- to understand how the emergence of a just-in-time secondary market affects the dynamics of an ahead-of-time primary auction. We find that competition in the primary auction significantly declines and surplus shifts away from Arbitrum. After the transition, bids paid in the primary auction correspond to only 14.8\% of the highest bid (compared to nearly 62.7\% in the \textit{Pre-Kairos} era), and a lower share of searcher profit-and-loss (PnL), despite total PnL (gross of auction payments) remains of similar magnitude across regimes. This indicates that the primary auction effectively ceases to function as a meaningful surplus extraction mechanism. Although demand for time-boosting valuable CEX--DEX arbitrage transactions continues to increase with external price volatility, observed bids in the Timeboost auction no longer reflect this demand. While the exact distribution of the additional value between searchers and Kairos remains unclear, the evidence suggests that the secondary market captures a substantial share at the expense of the primary auctioneer. We conclude by outlining possible ways for Arbitrum to recapture this value, including modifying the auction design to reduce the gap between value and payments and adopting a dynamic reserve price.