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Offline Samupaha

Front running Decentralized Exchanges
« on: June 13, 2015, 04:14:37 PM »

How front running is handled in the 2.0? I happened to stumble upon this blog post:

Quote
Bitshare’s Daniel Larimer has a very informative article called “How Bitshares prevents frontrunning” , which describes the problem better than I can, but unfortunately makes a terrible conclusion. The conclusion of the article is that they can’t prevent frontrunning, so you should just assume that you are being front run. This conclusions seems to be missing the whole entire point of having a limit order book. If you cannot provide a fair and orderly execution, you should just provide an auction system where orders are not automatically executed and users can choose the orders they execute against. Using a limit order book gives a dangerous illusion that the system is fair, when it is inherently rigged in favor of the miners.

Offline profitofthegods

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Re: Front running Decentralized Exchanges
« Reply #1 on: June 13, 2015, 04:52:15 PM »
That looks like a pretty major problem, but in discussing reputation as a factor in stopping centralized exchanges from frontrunning and comparing it to miners who do not have anything to lose, it doesn't recognize that 101 delegates do have a reputation and a stake in the success of the exchange, which would make Bitshares better than Counterparty, NXT and Augur.

Offline sittingduck

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Re: Front running Decentralized Exchanges
« Reply #2 on: June 13, 2015, 05:31:17 PM »
If you are front run it is no different than you get what you ask for.   Bts 1 always front run you.   


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clout

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Re: Front running Decentralized Exchanges
« Reply #3 on: June 13, 2015, 07:47:17 PM »
Front running isn't an actual issue.
« Last Edit: June 13, 2015, 07:49:13 PM by clout »

Offline Samupaha

Re: Front running Decentralized Exchanges
« Reply #4 on: June 14, 2015, 05:43:14 AM »
From Lessons Learned from BitShares 0.x
Quote
You Get What you Ask for Orders were a Bad Idea

BitShares went to great effort to avoid market manipulation and eliminate the supposed evil of “front running”. To stop front running, all orders were matched at the exact price specified in the order. Any overlap in the market was captured as fees. This means that to get the best price, a client would have to submit many orders manually matching each order. This had the side effect of slowing down how quickly someone could “walk the book”. This “slow down” effect was pitched as protection against market manipulation attacks on BitAssets.

Experience has taught us that the lack of standard limit orders has harmed market liquidity and adoption. BitShares 2.0 matches orders on a first-come, first-serve basis and gives the buyer the best price possible up to the limit. Rather than charging “unpredictable fees” from market overlap, the network charges a defined fee based upon the size of the order matched and the assets involved. Each asset issuer gets an opportunity to configure their fees.

Could somebody elaborate on this? Why front running isn't a big deal? How possible it is in 2.0?

Offline tonyk

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Re: Front running Decentralized Exchanges
« Reply #5 on: June 14, 2015, 05:59:48 AM »
From Lessons Learned from BitShares 0.x
Quote
You Get What you Ask for Orders were a Bad Idea

BitShares went to great effort to avoid market manipulation and eliminate the supposed evil of “front running”. To stop front running, all orders were matched at the exact price specified in the order. Any overlap in the market was captured as fees. This means that to get the best price, a client would have to submit many orders manually matching each order. This had the side effect of slowing down how quickly someone could “walk the book”. This “slow down” effect was pitched as protection against market manipulation attacks on BitAssets.

Experience has taught us that the lack of standard limit orders has harmed market liquidity and adoption. BitShares 2.0 matches orders on a first-come, first-serve basis and gives the buyer the best price possible up to the limit. Rather than charging “unpredictable fees” from market overlap, the network charges a defined fee based upon the size of the order matched and the assets involved. Each asset issuer gets an opportunity to configure their fees.

Could somebody elaborate on this? Why front running isn't a big deal? How possible it is in 2.0?

Front running is a big deal (or not so much)...the 'solution' to the problem was a bigger mess than the front running itself and at the end of the day 'get what you asked for' order matching did solve front running but prevented a ton of necessary stuff. The sensible/logical implementation of the cover orders made  'get what you asked for'  only partially applicable to the BTS-DEX orders...

Solution to  front running is left for the future.....

« Last Edit: June 14, 2015, 06:11:42 AM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline starspirit

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Re: Front running Decentralized Exchanges
« Reply #6 on: June 14, 2015, 06:07:37 AM »
My view is You Get What You Ask For was never a good solution to front-running, because by definition it cost users more than if they had just accepted the front-running in the first place.

 

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