What Is a “Just-in-Time” (JIT) Liquidity Attack and How Does It Exploit the AMM Structure?
A JIT liquidity attack is a form of MEV where a bot detects a large trade in the mempool and quickly adds a large amount of liquidity just before the trade executes. This temporarily lowers the slippage and allows the large trade to execute at a better price.
Immediately after the trade, the bot removes the liquidity, capturing the trading fees generated by the large trade and the slight profit from the price change, all while exposing the liquidity for only a single block.
Glossar
Exploit
Vulnerability ⎊ Within cryptocurrency, options trading, and financial derivatives, a vulnerability represents a systemic weakness in a protocol, smart contract, or trading infrastructure that can be leveraged to gain an unfair advantage or inflict financial harm.
JIT Liquidity Provision
Provision ⎊ Just-in-Time (JIT) liquidity provision, within the context of cryptocurrency derivatives and options trading, represents a dynamic allocation of capital to market making activities precisely when and where it is needed, rather than maintaining a static inventory.
Jit Liquidity
Momentum ⎊ The concept of Jit Liquidity, particularly within cryptocurrency derivatives and options markets, reflects the immediate availability of funds to satisfy margin requirements or execute trades, crucially differentiating it from traditional liquidity assessments.