Flash Boys 2.0: Frontrunning in Decentralized Exchanges, Miner Extractable Value, and Consensus Instability
| Autor: | Tyler Kell, Ari Juels, Yunqi Li, Philip Daian, Xueyuan Zhao, Lorenz Breidenbach, Iddo Bentov, Steven Goldfeder |
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| Rok vydání: | 2020 |
| Předmět: |
Cryptocurrency
Exploit Computer science 0102 computer and information sciences 02 engineering and technology Bidding Computer security computer.software_genre 01 natural sciences 010201 computation theory & mathematics 0202 electrical engineering electronic engineering information engineering Common value auction 020201 artificial intelligence & image processing Profitability index Arbitrage High-frequency trading computer Database transaction |
| Zdroj: | IEEE Symposium on Security and Privacy |
| Popis: | Blockchains, and specifically smart contracts, have promised to create fair and transparent trading ecosystems.Unfortunately, we show that this promise has not been met. We document and quantify the widespread and rising deployment of arbitrage bots in blockchain systems, specifically in decentralized exchanges (or "DEXes"). Like high-frequency traders on Wall Street, these bots exploit inefficiencies in DEXes, paying high transaction fees and optimizing network latency to frontrun, i.e., anticipate and exploit, ordinary users’ DEX trades.We study the breadth of DEX arbitrage bots in a subset of transactions that yield quantifiable revenue to these bots. We also study bots’ profit-making strategies, with a focus on blockchain-specific elements. We observe bots engage in what we call priority gas auctions (PGAs), competitively bidding up transaction fees in order to obtain priority ordering, i.e., early block position and execution, for their transactions. PGAs present an interesting and complex new continuous-time, partial-information, game-theoretic model that we formalize and study. We release an interactive web portal, frontrun.me, to provide the community with real-time data on PGAs.We additionally show that high fees paid for priority transaction ordering poses a systemic risk to consensus-layer security. We explain that such fees are just one form of a general phenomenon in DEXes and beyond—what we call miner extractable value (MEV)—that poses concrete, measurable, consensus-layer security risks. We show empirically that MEV poses a realistic threat to Ethereum today.Our work highlights the large, complex risks created by transaction-ordering dependencies in smart contracts and the ways in which traditional forms of financial-market exploitation are adapting to and penetrating blockchain economies. |
| Databáze: | OpenAIRE |
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