What Is a “Just-in-Time” (JIT) Liquidity Attack in the Context of Concentrated Liquidity?
A JIT attack is an advanced MEV strategy where a bot detects a large incoming swap, quickly deposits a concentrated liquidity position just before the swap executes, captures the trading fees from the large swap, and then immediately withdraws the liquidity. This happens within the same block.
JIT providers earn a disproportionate share of the fees without taking on any long-term impermanent loss risk, effectively front-running long-term LPs who have provided the continuous liquidity.
Glossar
Impermanent Loss
Exposure ⎊ Impermanent loss, a risk inherent in automated market maker (AMM) protocols and liquidity provision, arises from price divergence between assets deposited and their subsequent value upon withdrawal.
Mev Strategy
Arbitrage ⎊ Maximal Extractable Value (MEV) represents a pursuit of profit through identifying and capitalizing on discrepancies across different points within a blockchain, specifically relating to transaction ordering.
Concentrated Liquidity
Allocation ⎊ Concentrated Liquidity represents a strategic deployment of capital within automated market makers, notably on decentralized exchanges, shifting from a uniform distribution to a targeted provision around specific price ranges.
Liquidity Attack
Manipulation ⎊ A liquidity attack is a sophisticated manipulative strategy involving the rapid, large-scale withdrawal of buy or sell orders, or the exhaustion of order book depth, to engineer a sudden and severe price dislocation.