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I think if you talk about the behaviour of the system without talking about the technology it becomes quite clear that this system is just poison. You have to p

I think if you talk about the behaviour of the system without talking about the technology it becomes quite clear that this system is just poison. You have to pubish your deals before they execute, and then everyone else has an opportunity to bribe the people processing the deal to screw you up. Who actually wants that behaviour?

dcow 6y ago
How is this different from what we have today with payment for order flow and HFT? I’m no crypto bull, but I kinda prefer a natural and transparent system to a tightly regulated one steeped in corruption.
- Traster 6y ago
  So there are 2 things there. There's payment for order flow - Robinhood will route your order to Citadel and Citadel will choose whether to trade with you at that price (or route your order somewhere else), the big difference though, is that Citadel is legally obliged to give you the NBBO (national best bid offer) so whilst Citadel is paying to be the counter party on your trade, it doesn't change the deal you get. It's no worse for you - you still get the best price, but there are various reasons Citadel wants to take the counter-side of that trade. HFTs are again, not able to effect your trade. If you place an order in an exchange then HFT's will respond once you have traded, but your trade is guaranteed to go into the market and execute without anyone interfering before hand. If there was liquidity in the market when you tried to trade at the price you entered, you will get that trade. Now it may be that an HFT sees your trade in Chicago and goes off and trades on some other exchange super quickly based on the new information or they might cancel their remaining orders in the makret, but they cannot interfere with your trade before execution. What's unique about the ethereum situation is that different actors int he market can interfere with your trade before it executes because your desire to trade gets published before it's executed and the miners (in this case I guess sort of analogous to the exchange) are willing to prevent you accessing the market due to a bribe from a third party based on the information you were forced to publish. Which means you never have confidence that you can actually execute a transaction you beleive is available in the market.
- kristjansson 6y ago
  For one, traditional finance has the NBBO requirement. Regardless of how an order makes its way to to a broker, they can’t execute at a worse price than is available. Payment for order flow (at least in the case of retail brokerages) is more about the big players preference for trading with unsophisticated players. The rubes just lose more often without any malfeasance required on the side of the brokerage

dcow 6y ago

How is this different from what we have today with payment for order flow and HFT? I’m no crypto bull, but I kinda prefer a natural and transparent system to a tightly regulated one steeped in corruption.

Traster 6y ago
So there are 2 things there. There's payment for order flow - Robinhood will route your order to Citadel and Citadel will choose whether to trade with you at that price (or route your order somewhere else), the big difference though, is that Citadel is legally obliged to give you the NBBO (national best bid offer) so whilst Citadel is paying to be the counter party on your trade, it doesn't change the deal you get. It's no worse for you - you still get the best price, but there are various reasons Citadel wants to take the counter-side of that trade. HFTs are again, not able to effect your trade. If you place an order in an exchange then HFT's will respond once you have traded, but your trade is guaranteed to go into the market and execute without anyone interfering before hand. If there was liquidity in the market when you tried to trade at the price you entered, you will get that trade. Now it may be that an HFT sees your trade in Chicago and goes off and trades on some other exchange super quickly based on the new information or they might cancel their remaining orders in the makret, but they cannot interfere with your trade before execution. What's unique about the ethereum situation is that different actors int he market can interfere with your trade before it executes because your desire to trade gets published before it's executed and the miners (in this case I guess sort of analogous to the exchange) are willing to prevent you accessing the market due to a bribe from a third party based on the information you were forced to publish. Which means you never have confidence that you can actually execute a transaction you beleive is available in the market.
kristjansson 6y ago
For one, traditional finance has the NBBO requirement. Regardless of how an order makes its way to to a broker, they can’t execute at a worse price than is available. Payment for order flow (at least in the case of retail brokerages) is more about the big players preference for trading with unsophisticated players. The rubes just lose more often without any malfeasance required on the side of the brokerage