How Does a CEX Ensure Fair Transaction Ordering without a Public Mempool?
A Centralized Exchange (CEX) ensures fair transaction ordering using a private, centralized matching engine that processes orders based on strict, predefined rules. The primary rule is typically price-time priority: the best price order is executed first, and if prices are equal, the order submitted earliest is executed first.
This internal, sequential processing eliminates the opportunity for external actors to pay higher fees to jump the queue, which is the mechanism of front-running on public blockchains.
Glossar
Fair Transaction Ordering
Determinacy ⎊ Fair Transaction Ordering establishes a predictable sequence for order execution within a decentralized exchange or broader financial system, mitigating front-running and manipulation risks inherent in asynchronous environments.
Fair Ordering
Order ⎊ Fair ordering, within cryptocurrency derivatives and options markets, represents a mechanism designed to mitigate front-running and other forms of order manipulation, ensuring a more equitable execution environment.