How Can a Decentralized Exchange (DEX) Design Its Transaction Mechanism to Resist Sandwich Attacks?
DEXs can implement mechanisms like batch auctions, similar to CEXs, to execute all transactions submitted within a time window at a single price. Another method is using time-locked transactions or commitment schemes, where the transaction details are hidden until the execution time.
This removes the front-runner's ability to observe the pending order and submit a profitable transaction before it.
Glossar
Decentralized Exchange (DEX)
Platform ⎊ A Decentralized Exchange (DEX) is a cryptocurrency trading platform that operates without a central intermediary, allowing users to trade digital assets directly from their non-custodial wallets.
Time-Locked Transactions
Mechanism ⎊ Time-Locked Transactions represent a conditional transfer of digital assets, executed only upon fulfillment of predetermined temporal or event-based criteria, fundamentally altering settlement finality in decentralized finance.
Decentralized Exchange
Architecture ⎊ A decentralized exchange (DEX) fundamentally diverges from traditional order book exchanges through its reliance on smart contracts and blockchain technology to facilitate peer-to-peer trading, eliminating the need for a central intermediary.