Eliminating Sandwich Attacks with the Help of Game Theory
Lioba Heimbach, Roger Wattenhofer
2022Proceedings of the 2022 ACM on Asia Conference on Computer and Communications Security49 citationsDOIOpen Access PDF
Abstract
Predatory trading bots lurking in Ethereum's mempool present invisible taxation of traders on automated market makers (AMMs). AMM traders specify a slippage tolerance to indicate the maximum price movement they are willing to accept. This way, traders avoid automatic transaction failure in case of small price movements before their trade request executes. However, while a too-small slippage tolerance may lead to trade failures, a too-large slippage tolerance allows predatory trading bots to profit from sandwich attacks. These bots can extract the difference between the slippage tolerance and the actual price movement as profit.
Topics & Concepts
SlippageProfit (economics)Database transactionComputer scienceComputer securityBusinessMicroeconomicsEconomicsDatabaseFinancial economicsBlockchain Technology Applications and SecurityComplex Systems and Time Series AnalysisAuction Theory and Applications