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Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

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Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#11

Post by dchftcs »

zydex wrote: post #8
finexplained wrote: post #6

Earlier quoted context omitted.

Yep, that one is my bad. That's why I added the edit.

I think (1) is a bit harsh relating to the terminology. Technically front running is based on plainly “non-public” information. The term has been generalised and expanded to include crypto transactions which are slightly more obfuscated from the average user who doesn’t sit and watch the mempool. I think the term is completely appropriate.

It's not appropriate, because it's a poor generalization to begin with. People just see "frontrunning" and have a vague sense it's fundamentally illegitimate because of vague connections to the illegal practice, and yell things that make no sense on wsb and the like.

The usage is popularized because it makes sensationalist headlines and forum headers, that the "generalized usage" was either misguided or intended to confuse, which correlates poorly with accurately conveying the meaning of word or capturing the details of the blockchain phenomenon.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#12

Post by neatze »

ironSkillet wrote: post #2

HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.

In past few years, I got calls with offer to build artificial market making models (aka pump and dump) for crypto exchanges, with 7 figures payout per model + commission, I refuse to do such work, this is just disgusting, don't care how legal or illegal this is, it did not seem they have infrastructure for HFT in terms of Order Routing like it is on stock exchanges like BATS etc ...

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#13

Post by Retric »

finexplained wrote: post #9
zydex wrote: post #8

Earlier quoted context omitted.

I think (1) is a bit harsh relating to the terminology. Technically front running is based on plainly “non-public” information. The term has been generalised and expanded to include crypto transactions which are slightly more obfuscated from the average user who doesn’t sit and watch the mempool. I think the term is completely appropriate.

I respectfully don't think it is too harsh. Every legal definition I know of frontrunning requires a client relationship. Even in the case of "non-public" information, frontrunning refers to trading ahead of your client based on non-public information related to the clients securities. Trading on non-public information when a client is not involved is referred to as insider trading. Also in this context, the reason t…

People submitting crypto transactions to miners are their clients, as in the miners get paid when one of their transactions occur.

Index front running is not illegal and is based on public information. So, this may be a form of legal front running.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#14

Post by throwaway_1928 »

neatze wrote: post #12
ironSkillet wrote: post #2

HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.

In past few years, I got calls with offer to build artificial market making models (aka pump and dump) for crypto exchanges, with 7 figures payout per model + commission, I refuse to do such work, this is just disgusting, don't care how legal or illegal this is, it did not seem they have infrastructure for HFT in terms of Order Routing like it is on stock exchanges like BATS etc ...

That makes you better than most people TBH.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#15

Post by JumpCrisscross »

Retric wrote: post #13
finexplained wrote: post #9

Earlier quoted context omitted.

I respectfully don't think it is too harsh. Every legal definition I know of frontrunning requires a client relationship. Even in the case of "non-public" information, frontrunning refers to trading ahead of your client based on non-public information related to the clients securities. Trading on non-public information when a client is not involved is referred to as insider trading. Also in this context, the reason t…

People submitting crypto transactions to miners are their clients, as in the miners get paid when one of their transactions occur. Index front running is not illegal and is based on public information. So, this may be a form of legal front running.

> submitting crypto transactions to miners are their clients

This is a novel construct. It may be wise. But it’s not the status quo.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#16

Post by finexplained »

Retric wrote: post #13
finexplained wrote: post #9

Earlier quoted context omitted.

I respectfully don't think it is too harsh. Every legal definition I know of frontrunning requires a client relationship. Even in the case of "non-public" information, frontrunning refers to trading ahead of your client based on non-public information related to the clients securities. Trading on non-public information when a client is not involved is referred to as insider trading. Also in this context, the reason t…

People submitting crypto transactions to miners are their clients, as in the miners get paid when one of their transactions occur. Index front running is not illegal and is based on public information. So, this may be a form of legal front running.

This allegation of frontrunning references another trading participant, not the miners. Also, arguably, and certainly not legally.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#17

Post by kasey_junk »

ironSkillet wrote: post #2

HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.

It’s not just HFT firms. Every professional trader in the world who got put out of business in the regular markets for being too inefficient is running old fashioned games on the crypto exchanges and making money.

Watching the full depth order book on any crypto exchange is like “Back To the Future”.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#18

Post by Retric »

finexplained wrote: post #16
Retric wrote: post #13

Earlier quoted context omitted.

People submitting crypto transactions to miners are their clients, as in the miners get paid when one of their transactions occur. Index front running is not illegal and is based on public information. So, this may be a form of legal front running.

This allegation of frontrunning references another trading participant, not the miners. Also, arguably, and certainly not legally.

Many cases of front running involved 3rd parties with access to client information. Anyway, my point was legally the information may be protected even if the protocol is open, though I seriously doubt that it would be considered so stranger results have happened.

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#19

Post by skippyboxedhero »

kasey_junk wrote: post #17
ironSkillet wrote: post #2

HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.

It’s not just HFT firms. Every professional trader in the world who got put out of business in the regular markets for being too inefficient is running old fashioned games on the crypto exchanges and making money. Watching the full depth order book on any crypto exchange is like “Back To the Future”.

Just imo, I think some of the "games" are fair play. Spoofing only became illegal when computerised trading started. When it was just humans trading electronically, everyone knew spoofing happened, the evidence was in the order book, and people traded accordingly (and, ofc, spoofing involved taking on monumental levels of risk).

The rules we have are pretty bent. Everything is geared towards transparency but if algos work out your trades are actually moving the price, the liquidity is gone. So vanishing liquidity is okay, but spoofing isn't? Hiding your intention is an innate part of markets, and is a way to defend yourself against other traders.

I actually support more consumer protection, the pump and dumps indicate that some consumers shouldn't be in these markets. But trading has always been the Wild West (and still is but the banditos run the town instead of the Sheriff now).

Re: Flash Boys 2: Frontrunning, transaction reordering, consensus instability (2019)

#20

Post by dehrmann »

neatze wrote: post #12
ironSkillet wrote: post #2

HFT firms are re-applying a lot of techniques that worked a decade or more ago in regular markets, except now there's way less competition and way less regulation. They are making a killing right now in crypto.

In past few years, I got calls with offer to build artificial market making models (aka pump and dump) for crypto exchanges, with 7 figures payout per model + commission, I refuse to do such work, this is just disgusting, don't care how legal or illegal this is, it did not seem they have infrastructure for HFT in terms of Order Routing like it is on stock exchanges like BATS etc ...

Is it any more disgusting than people speculating in crypto, but lying to themselves and calling it an "investing?"
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