Can a Mempool Be Monitored on a Derivatives-Focused Blockchain?
Yes, a mempool can be monitored on a derivatives-focused blockchain if the protocol uses a public, transparent ledger for transaction submission and settlement. Many decentralized derivatives platforms operate on blockchains like Ethereum or Solana, which have public mempools.
Front-running on these platforms involves monitoring the mempool for large collateral deposits, liquidations, or options exercise transactions that will predictably affect the protocol's price oracle or liquidity. Centralized derivatives exchanges, however, do not have a public mempool as their order flow is internal.
Glossar
Options Exercise Transactions
Transaction ⎊ Options Exercise Transactions are the definitive on-chain actions executed by the option holder to formally invoke their right to buy or sell the underlying crypto asset at the predetermined strike price.
Price Oracle
External Data Bridge ⎊ A Price Oracle is a decentralized service that securely feeds real-world asset prices, typically derived from traditional exchanges or aggregated crypto venues, onto the blockchain so that smart contracts can execute financial logic based on current market valuation.
Transaction Submission
Action ⎊ Transaction Submission is the act of broadcasting a digitally signed transaction payload to the network's mempool, signaling the user's intent to execute a specific smart contract function, such as initiating a trade or posting collateral.
Decentralized Derivatives
Architecture ⎊ Decentralized derivatives represent a fundamental shift in financial contract design, moving away from centralized exchanges and intermediaries towards blockchain-based systems.
Transparent Ledger
Attribute ⎊ Transparent Ledger describes the characteristic of a distributed ledger where all recorded transactions are cryptographically verifiable by network participants, offering an unprecedented level of auditable history for asset ownership and transfers.
Order Flow
Execution Signal ⎊ Order Flow refers to the stream of incoming buy and sell instructions directed toward an exchange or liquidity pool, providing real-time insight into the immediate directional intent of market participants.