Re:The Blockchain Is a Dark Forest
by RandomLensman on Sunday March 21, 2021 @02:28PM
(#26532647)
I think that is too simplistic. For example, in a CLOB market putting something in the order book is visible and depending on price and volume will not just execute in one go and therefore cause change. But it is a market reaction to a published intend to trade.
Issues around market microstructure, liquidity etc are very well researched.
You do not understand me. Reactions to an order make sense. But if I click "Buy", and before the order hits the book, the software vendor that is processing my order notifies a market maker to increase their price in order to make me pay slightly more, this would be unfair ("front running").
That seems like a crazy definition, since fully realized it expresses the idea that people should be able to make large trades atomically without moving markets.
It's not about doing trades without moving market afterwards, it's about market moving _before trade_ as a preliminary response of the trade existence.
But trades aren't atomic, even though the i-bank traders in Flash Boys wanted to get paid to pretend they were. If you're trying to unload N shares, that's going to happen in some number of k<=n-sized chunks.
I'm not sure how this can be applied to the discussed issue? Especially considering that this kind of trades are atomic (when run by miners/flashbots), though maybe we use different notion of "atomic".
I don’t think that’s crazy. I think most people think it’s fair that the plumbing between their decision and the action shouldn’t be used to profit from them. Of course it happens in tons of ways. But that’s the general feeling. They want to see an order book, and if the book quotes X price, the seller won’t change it when they click the Buy button, etc.
In blockchain, the miners control the order of transactions. They do all manner of things to extract profit from your trade because of that control. The simple solution, which is good enough for most people, is to restrict the slippage and assume the miners will get as close to that number as possible. But people are thinking of this problem very hard and ways to solve it.