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UK-SPS Seminar 23rd June 2021 - High-Frequency Trading
Abstract: 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.
(The talk was based on a paper at IEEE Symposium on Security & Privacy (S&P) 2021. The preprint is available: https://arxiv.org/pdf/2009.14021.pdf.)
Bio: 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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UK-SPS is an inter-university seminar series on cyber security and privacy. Seminar details are also advertised on our website, calendar and Twitter, and recordings will be available on our YouTube channel afterwards.
Last modified: Tue, 27 Jul 2021 10:19:27 BST