# LVR.wtf

## Overview

Loss-Versus-Rebalancing (LVR), as defined by [Milionis et al](https://arxiv.org/pdf/2208.06046)., measures the cost on-chain liquidity providers (LPs) face from offering their liquidity at stale prices compared to centralized exchanges (CEXs). While decentralized exchanges (DEXs) on Ethereum update their prices every block interval (12 seconds), CEXs operate in continuous time, enabling arbitrageurs to profit whenever volatility is realized during this period on the CEX.

To quantify this, [Brontes](https://book.brontes.xyz/intro.html) – a generic MEV-tracing engine for Ethereum built by [Sorella Labs](https://sorellalabs.xyz) – classified CEX-DEX arbitrage trades on Ethereum using an instantaneous markout against Binance mid-prices. However, its accuracy assumes that the instantaneous CEX mid-price is an apt metric for the "true price" of the asset at that time. LVR.wtf builds on this by adding alternative valuation methods (markouts) to the CEX prices, while also considering slippage undertaken in trading on the centralized exchange. This fundamentally offers a new, more tailored, perspective on LVR classification and quantification through empirical simulation taking on these new constraints. The value leakage from LPs remains prominent; the necessity for a more sustainable approach to decentralized exchanges is reinforced.

## Who is LVR.wtf for?

LVR.wtf is built for DeFi developers, researchers, and liquidity providers. It provides detailed insights into the extent of LVR currently faced by LPs and includes comparisons with existing measurements, such as Brontes, to offer a more comprehensive view of the LVR landscape.