How Does the Lack of a Central Entity Complicate the Enforcement of Anti-Front-Running Measures in DeFi?
The lack of a central entity means there is no single party to hold legally accountable, fine, or compel to implement surveillance systems. Traditional enforcement relies on centralized control over order flow and access to non-public data, which does not exist in DeFi.
Enforcement must shift to targeting the malicious actors (bots, users) and the underlying protocols (through code audits and vulnerability disclosures) rather than a central intermediary.
Glossar
Front-Running Bot
Exploitation ⎊ A front-running bot in cryptocurrency, options trading, and financial derivatives represents an automated trading strategy designed to capitalize on pending transaction information, often obtained through direct access to mempools or order books, creating an informational advantage.
Anti-Front-Running Measures
Mitigation ⎊ Anti-front-running measures in cryptocurrency and derivatives markets represent a suite of protocols designed to curtail information leakage and subsequent exploitative trading practices.
Central Entity
Control ⎊ A central entity in financial markets exercises control over transaction processing, market access, and regulatory compliance.
Enforcement
Regulation ⎊ Enforcement within cryptocurrency, options trading, and financial derivatives primarily manifests as the application of existing securities laws and the development of novel frameworks to address unique risks.