How Do Decentralized Perpetual Futures Exchanges Attempt to Mitigate Liquidation Front-Running?
Decentralized perpetual futures exchanges employ several technical strategies. They may use a delayed or batched liquidation process to prevent instant, high-value orders from hitting the mempool.
Some use a decentralized network of liquidators who compete to execute the liquidation at the best price, reducing the predictability of a single large order. Others integrate MEV-resistant oracles or utilize private transaction submission channels to hide the liquidation transaction from front-running bots.
Glossar
Perpetual Futures Exchanges
Exchange ⎊ Perpetual futures exchanges represent a distinct category within cryptocurrency derivatives, facilitating perpetual contracts ⎊ contracts with no fixed expiration date.
Decentralized Perpetual Futures
Mechanism ⎊ Decentralized perpetual futures represent a novel financial instrument leveraging blockchain technology to replicate the functionality of traditional perpetual futures contracts, eliminating intermediaries and enhancing transparency.
Private Transaction Submission
Confidentiality ⎊ Private Transaction Submission, within cryptocurrency, options, and derivatives, denotes a method of order placement and execution shielded from pre-trade information leakage.