Can a Private Mempool Be Used for Arbitrage That Is Not Front-Running?
Yes, a private mempool is commonly used for legitimate arbitrage that is not considered front-running. Arbitrage involves profiting from price discrepancies across different exchanges or pools.
By using a private mempool, an arbitrage bot can submit its trade with a guarantee of execution, preventing other arbitrage bots from seeing the opportunity and racing to execute the trade first. This is considered "good" MEV as it corrects price inefficiencies without harming a retail trader.
Glossar
Private Mempool
Propagation ⎊ The private mempool represents a localized, unconfirmed transaction pool maintained by individual nodes within a cryptocurrency network, distinct from the globally broadcasted public mempool.
Legitimate Arbitrage
Definition ⎊ Legitimate arbitrage involves the simultaneous purchase and sale of an asset or derivative across two or more markets to profit from a temporary price discrepancy, with minimal or zero net risk.