High-Frequency Trading on Decentralized On-Chain Exchanges
| Autor: | Christof Ferreira Torres, Liyi Zhou, Arthur Gervais, Duc Viet Le, Kaihua Qin |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
FOS: Computer and information sciences
Computer science [C05] [Engineering computing & technology] Computer Science - Cryptography and Security Computer science Transparency (market) Financial market Sciences informatiques [C05] [Ingénierie informatique & technologie] Asset (computer security) Computer security computer.software_genre Outcome (game theory) Adversarial system Revenue High-frequency trading Cryptography and Security (cs.CR) computer Database transaction |
| Zdroj: | IEEE Symposium on Security and Privacy |
| DOI: | 10.1109/sp40001.2021.00027 |
| Popis: | Decentralized exchanges (DEXs) allow parties to participate in financial markets while retaining full custody of their funds. However, the transparency of blockchain-based DEX in combination with the latency for transactions to be processed, makes market-manipulation feasible. For instance, adversaries could perform front-running -- the practice of exploiting (typically non-public) information that may change the price of an asset for financial gain. In this work we formalize, analytically exposit and empirically evaluate an augmented variant of front-running: sandwich attacks, which involve front- and back-running victim transactions on a blockchain-based DEX. We quantify the probability of an adversarial trader being able to undertake the attack, based on the relative positioning of a transaction within a blockchain block. We find that a single adversarial trader can earn a daily revenue of over several thousand USD when performing sandwich attacks on one particular DEX -- Uniswap, an exchange with over 5M USD daily trading volume by June 2020. In addition to a single-adversary game, we simulate the outcome of sandwich attacks under multiple competing adversaries, to account for the real-world trading environment. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|