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Moving to Optimism L2 will remove miner advantage. Edit: of course, Optimism "Chain Organizers" can front-run, but if they will be run by Uniswap themselves, t

by flixic 6y ago

Moving to Optimism L2 will remove miner advantage. Edit: of course, Optimism "Chain Organizers" can front-run, but if they will be run by Uniswap themselves, then they have no incentive to ruin their own product.

deleted 6y ago
[deleted]
dcolkitt 6y ago
This is a misunderstanding. You don't need to be a miner to front-run transactions. You simply need to run a full node, with visibility into the P2P network. It's true that miners always have "right of first refusal", in that whoever mines the block can choose to prioritize his own transactions over anyone else. But if miners don't exercise that option, then any third party can front-run the target by outbidding them. Getting rid of miners, does not in anyway remove the issue of front-running. Currently, less than 5% of front-running activity is performed by miners. As long as transactions are propagated over a P2P network, then front running is still possible. So Optimism only fixes this problem, if Uniswap LLC is hosting the entire side chain and participants are directly submitting their transactions to Uniswap's servers instead of the block chain. However if that's the case, then they almost certainly will be legally obligated to perform KYC/AML on all clients, at which point they are essentially a centralized exchange. For reference, even Binance Smart Chain, which is heavily criticized for being a centralized exchange in disguise, does not take this approach. Centralize validators are used, but the network itself is still P2P instead of centrally hosted.
- flixic 6y ago
  There's a lot of semi-incorrect information here. With Optimism, there can be multiple L2 chains, by different "Chain Organizers". When you submit a transaction, you get a receipt from Organizer, a cryptographic promise that it will be included in future rollup. It means only Organizers can attempt to front-run, by adding a transaction before giving out your receipt. And users can always choose to use different Organizers, those that don't front-run. Since Organizers gain a small amount of fees, it doesn't make sense to be a bad, front-running Organizer.
- phyalow 6y ago
  I spent quite a lot of time developing Uniswap/Sushiswap/other dex arbitrage (back/front/sandwich) tools and bots over the last 6 months. When you say you simply need to run a full node, thats incorrect. It is a prerequisite yes, but much less than half the battle. You also need now to ensure correct order placement (on any opportunity there are upwards of 5-15 competing bots), a friendly relay network/mining pools, efficiently node peering (e.g. 2-400 peers per node, managed on a custom routing table), a network of nodes to broadcast/listen for mem pool messages across the entire network instantaneously without waiting for P2P propagation (1-2 hops may introduce enough latency to lose out on the arb) (& some nodes are malicious - who fail to propagate arb'ble tx's), patched/custom GETH instances running on nodes (I am not at liberty to reveal what optimizations make one competitive). And then above all of that you need to be able to absorb, identify profitable transactions and then compute/simulate optimal transaction parameters in a very constrained amount of time. So its not at all simple, in fact I have wound down most of my operations as the costs vs. rewards are extremely marginal now vs. what they were mid last year.
- xur17 6y ago
  > Currently, less than 5% of front-running activity is performed by miners. How do we know this number? It seems like it would be possible for miners to front run without any identifying characteristics.

by flixic 6y ago

deleted 6y ago

[deleted]

dcolkitt 6y ago

This is a misunderstanding. You don't need to be a miner to front-run transactions. You simply need to run a full node, with visibility into the P2P network. It's true that miners always have "right of first refusal", in that whoever mines the block can choose to prioritize his own transactions over anyone else. But if miners don't exercise that option, then any third party can front-run the target by outbidding them. Getting rid of miners, does not in anyway remove the issue of front-running. Currently, less than 5% of front-running activity is performed by miners. As long as transactions are propagated over a P2P network, then front running is still possible. So Optimism only fixes this problem, if Uniswap LLC is hosting the entire side chain and participants are directly submitting their transactions to Uniswap's servers instead of the block chain. However if that's the case, then they almost certainly will be legally obligated to perform KYC/AML on all clients, at which point they are essentially a centralized exchange. For reference, even Binance Smart Chain, which is heavily criticized for being a centralized exchange in disguise, does not take this approach. Centralize validators are used, but the network itself is still P2P instead of centrally hosted.

flixic 6y ago
There's a lot of semi-incorrect information here. With Optimism, there can be multiple L2 chains, by different "Chain Organizers". When you submit a transaction, you get a receipt from Organizer, a cryptographic promise that it will be included in future rollup. It means only Organizers can attempt to front-run, by adding a transaction before giving out your receipt. And users can always choose to use different Organizers, those that don't front-run. Since Organizers gain a small amount of fees, it doesn't make sense to be a bad, front-running Organizer.
phyalow 6y ago
I spent quite a lot of time developing Uniswap/Sushiswap/other dex arbitrage (back/front/sandwich) tools and bots over the last 6 months. When you say you simply need to run a full node, thats incorrect. It is a prerequisite yes, but much less than half the battle. You also need now to ensure correct order placement (on any opportunity there are upwards of 5-15 competing bots), a friendly relay network/mining pools, efficiently node peering (e.g. 2-400 peers per node, managed on a custom routing table), a network of nodes to broadcast/listen for mem pool messages across the entire network instantaneously without waiting for P2P propagation (1-2 hops may introduce enough latency to lose out on the arb) (& some nodes are malicious - who fail to propagate arb'ble tx's), patched/custom GETH instances running on nodes (I am not at liberty to reveal what optimizations make one competitive). And then above all of that you need to be able to absorb, identify profitable transactions and then compute/simulate optimal transaction parameters in a very constrained amount of time. So its not at all simple, in fact I have wound down most of my operations as the costs vs. rewards are extremely marginal now vs. what they were mid last year.
xur17 6y ago
> Currently, less than 5% of front-running activity is performed by miners. How do we know this number? It seems like it would be possible for miners to front run without any identifying characteristics.