Academics Detect Manipulation On ‘Dexes' As Cryptocurrency Trading Expands

A recent academic paper by researchers at Cornell Tech and other academic institutions describes rampant trading manipulation on decentralized cryptocurrency exchanges (DEXes). While the vast majority of cryptocurrency trading volume occurs over centralized exchanges (which custody customer assets and settle trades), DEXes allow for more direct trading, and their use is expected to grow. This paper, however, reports on new high-frequency trading firms that deploy autonomous, algorithmic trading programs that anticipate and take advantage of ordinary users' trading patterns, allowing for front-running (i.e., seeing orders ahead of others and placing their own trades first), aggressive latency optimization and other market manipulation techniques. The paper also found bots engaging in priority "gas" auctions , competitively bidding up transaction fees in order to get priority orders (early block position and execution) for their transactions. A contributor to the paper