Arbitrage
In short Arbitrage is profiting from a price gap for the same asset across markets by buying where it is cheaper and selling where it is more expensive.
Arbitrage means buying an asset where it is cheaper and selling it where it is more expensive at nearly the same moment, keeping the difference. The same token can trade at slightly different prices on two decentralized exchanges, on a decentralized and a centralized exchange, or on two different chains. The gap exists because each venue sets its price from its own order flow and liquidity.
Mechanically, a trader finds a gap, buys on the cheap side, and sells on the expensive side. On-chain, bots often do both legs in one transaction with a minimum-return check, so it reverts if the profit falls short, and only the failed-transaction gas is lost. A transaction that succeeds can still lose money, though, if gas and fees were underestimated.
On typical pool-based exchanges, each swap shifts the pool's price, and that is how the gap closes. On order-book venues, a trade only changes the quoted price if it consumes the resting orders. Either way, what the trader keeps is the difference minus gas, exchange fees, and slippage.
This matters to you because arbitrageurs are the reason a token's price in a small pool stays roughly in line with other markets. If a new token lists in a second pool at a skewed price, bots usually correct it within seconds, so a gap you can see on a screen is rarely free money by the time you click. Arbitrage is not the same as a sandwich attack, a harmful form of MEV where a bot trades on both sides of your swap to worsen your price. Arbitrage generally pushes prices together rather than targeting a specific order.
Be careful with gaps in small tokens, because many are not real. A big spread often comes from tiny liquidity, from transfer taxes, or from a honeypot where you can buy but never sell, and fake tokens can copy a real name and ticker. On a single chain, confirm the contract address matches on both sides. Across chains, legitimate versions of an asset often have different addresses, so verify the asset's identity and the bridge's supported mapping instead, since a bridged version can be a different wrapped token. Also check liquidity depth, test that selling works, add up every fee, and remember that bridging takes time while the price keeps moving.