  This paper explores the dynamics of Decentralized Finance (DeFi) within the
Layer-2 ecosystem, focusing on Automated Market Makers (AMM) and arbitrage on
Ethereum rollups. We observe significant shifts in trading activity from
Ethereum to rollups, with swaps on rollups happening 2-3 times more often,
though, with lower trade volume. By examining the price differences between
AMMs and centralized exchanges, we discover over 0.5 million unexploited
arbitrage opportunities on rollups. Remarkably, we observe that these
opportunities last, on average, 10 to 20 blocks, requiring adjustments to the
LVR metrics to avoid double-counting arbitrage. Our results show that arbitrage
in Arbitrum, Base, and Optimism pools ranges from 0.03% to 0.05% of trading
volume, while in zkSync Era it oscillates around 0.25%, with the LVR metric
overestimating arbitrage by a factor of five. Rollups offer not only lower gas
fees, but also provide faster block production, leading to significant
differences compared to the trading and arbitrage dynamics of Ethereum.
