Spherium Prepares a Counter Strategy to Fight Arbitrage Bots
The Crypto industry moves pretty fast.
Decentralized exchanges are gaining popularity over their centralized counterparts. Not only do these exchanges reduce security risk, but they also put users in-charge of their crypto assets.
However, like every new technology, decentralized exchanges are in their early stages, encountering challenges at every corner.
Front running is one of the primary loopholes DEXs are trying to fix.
This post provides an overview of front running and how Spherium is creating a solution to prevent it.
Understanding Front Running In DEXs
Decentralized exchanges are public in nature, which means everyone can see incoming orders, gas fees, and even cancellation orders. Simultaneously, there is a time delay between the broadcasting and confirmation/validation of a block, which creates an additional latency in DEXs.
Anticipating an upward trend, front runners or arbitrage traders submit transactions with higher gas price, incentivizing miners to process their transactions first. Arbitrage traders use bots to exploit the open nature of DEXs, booking profits at the cost of ordinary traders.
How Spherium Addresses Front Running Tactics
Spherium takes inspiration from the Mooniswap protocol.
Spherium introduces the concept of virtual balances on its HyperSwap protocol. During a high-slippage trade, Spherium doesn’t adjust the pricing in its pool immediately. Instead, it introduces a five-minute delay in price adjustments. Any new trade executes at old prices, limiting the risks of flash volatility. The prices update after a five-minute window, which leaves a tiny window for exploitation for arbitrage bots.
Spherium will take a significant portion of any slippage profits booked by arbitrage bots during this small window, thereby returning most of the profits to its ecosystem.
In addition to its current development strategy, Spherium will continue upgrading its platform to boost efficiency while minimizing trading costs.
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