Arbitrage is a trading approach that seeks to capture price differences through offsetting transactions. A simple version buys the same asset where it is cheaper and sells it where it is more expensive. The apparent difference must survive actual execution and costs.
Comparing executable prices
Suppose ten tokens can be bought at $100 each on one venue and sold at $102 on another. If both trades fully execute at those prices, the gross difference is $20. With $8 in total relevant costs, the net result is $12 under those assumptions.
The comparison requires available asks and bids for the intended quantity, not just last-trade prices. Assets with similar names, wrapped forms or different settlement rights may not be interchangeable.
Why a price gap can persist
Transfers take time and may face withdrawal restrictions or network costs. Traders who hold funds on both venues can reduce transfer delays between the trading steps, but still face custody and inventory risks.
One side may fill while the other fails, leaving directional exposure. Slippage, changing quotes and insufficient liquidity can remove the expected gain. Strategies involving borrowing or derivatives add financing, margin and liquidation risks; the arbitrage label does not make them risk-free.