How Do Decentralized Exchanges (DEXs) Try to Prevent Sandwich Attacks at the Protocol Level?
Some DEXs implement anti-MEV mechanisms directly into their smart contracts. This includes using batch auctions where all orders are executed at a single clearing price, removing the priority advantage of gas fees.
Other DEXs use private order flows or commit-reveal schemes. Additionally, some protocols incorporate 'Maximum Value Extraction' (MVE) protection, which may involve subsidizing users who were successfully attacked to compensate for their losses.
Glossar
Anti-Mev Mechanisms
Mechanism ⎊ Anti-MEV mechanisms represent a suite of technical and protocol-level designs implemented within decentralized finance to mitigate the extraction of value by block producers or arbitrageurs.
Private Order Flows
Flow ⎊ Private order flows, within cryptocurrency derivatives and options trading, represent discreet, non-displayed order execution pathways designed to minimize market impact and maintain price confidentiality.
Batch Auctions
Mechanism ⎊ Batch auctions, within cryptocurrency and derivatives markets, represent a simultaneous order submission and execution process, differing fundamentally from traditional continuous limit order books.
Sandwich Attacks
Execution ⎊ Sandwich attacks, within cryptocurrency derivatives and options trading, represent a sophisticated market manipulation tactic exploiting order book dynamics.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.