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High-Frequency Trading on Decentralized On-Chain Exchanges

June 23 (2021) @ 3:00 pm - 4:00 pm

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 talk 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.

(This talk is based on a paper at IEEE Symposium on Security & Privacy (S&P) 2021. The preprint is available: https://arxiv.org/pdf/2009.14021.pdf.)

 

Zoom meeting: https://imperial-ac-uk.zoom.us/j/98148533154?pwd=UGpSS2RXN1ZxRXVvcHRzUnU5azU4UT09
Meeting ID: 981 4853 3154
Passcode: 3c&CtJ

YouTube live stream: https://youtu.be/uMdyMHC7kZE

YouTube VoD

Details

Date:
June 23 (2021)
Time:
3:00 pm - 4:00 pm
Seminar Tags:

Presenter

Arthur Gervais (Imperial College London)

Arthur Gervais is a Lecturer (equivalent Assistant Professor) at Imperial College London. He's passionate about information security and worked since 2012 on blockchain related topics, with a recent focus on Decentralized Finance (DeFi).

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