Optimal Block Time for AMM Liquidity Providers under Jump-Diffusion Prices
Why making blockchain blocks faster doesn't always help liquidity providers
When prices jump suddenly instead of moving smoothly, making blockchain blocks faster stops helping liquidity providers avoid losses at a certain point. Researchers found that roughly one-quarter of losses at Ethereum come from these sudden price jumps that no block speed can prevent, and this fraction grows even larger on faster chains like Solana.
Blockchain developers often assume faster blocks help protect traders who provide liquidity to exchanges, but this research shows there's a hard limit to what speed can achieve. The optimal block time turns out to be around 8 seconds regardless of how big the pool is or how volatile prices are—meaning some losses are structural to markets with sudden price movements and cannot be engineered away.