FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker

Michele Ciampi; Muhammad Ishaq; Malik Magdon-Ismail; Rafail Ostrovsky; Vassilis Zikas

doi:10.1007/978-3-031-07689-3_31

FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker

Michele Ciampi, Muhammad Ishaq^*, Malik Magdon-Ismail, Rafail Ostrovsky, Vassilis Zikas

^*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

Abstract

Frontrunning is a major problem in DeFi applications, such as blockchain-based exchanges. Albeit, existing solutions are not practical and/or they make external trust assumptions. In this work we propose a market-maker-based crypto-token exchange, which is both more efficient than existing solutions and offers provable resistance to frontrunning attack. Our approach combines in a clever way a game theoretic analysis of market-makers with new cryptography and blockchain tools to defend against all three ways by which an exchange might front-run, i.e., (1) reorder trade requests, (2) adaptively drop trade requests, and (3) adaptively insert (its own) trade requests. Concretely, we propose novel light-weight cryptographic tools and smart-contract-enforced incentives to eliminate reordering attacks and ensure that dropping requests have to be oblivious (uninformed) of the actual trade. We then prove that with these attacks eliminated, a so-called monopolistic market-maker has no longer incentives to add or drop trades. We have implemented and benchmarked our exchange and provide concrete evidence of its advantages over existing solutions.

Original language	English
Title of host publication	Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings
Editors	Shlomi Dolev, Amnon Meisels, Jonathan Katz
Publisher	Springer, Cham
Pages	428-446
Number of pages	19
ISBN (Electronic)	978-3-031-07689-3
ISBN (Print)	978-3-031-07688-6
DOIs	https://doi.org/10.1007/978-3-031-07689-3_31
Publication status	Published - 23 Jun 2022
Event	6th International Symposium on Cyber Security Cryptography and Machine Learning, CSCML 2022 - Beer Sheva, Israel Duration: 30 Jun 2022 → 1 Jul 2022

Publication series

Name	Lecture Notes in Computer Science
Publisher	Springer Cham
Volume	13301
ISSN (Print)	0302-9743
ISSN (Electronic)	1611-3349

Conference

Conference	6th International Symposium on Cyber Security Cryptography and Machine Learning, CSCML 2022
Country/Territory	Israel
City	Beer Sheva
Period	30/06/22 → 1/07/22

Keywords

Blockchain
Fairness
Front-running
Market maker

Access to Document

10.1007/978-3-031-07689-3_31Licence: All Rights Reserved

https://eprint.iacr.org/archive/2021/609/20220330:191201Licence: Creative Commons: Attribution (CC-BY)
https://link.springer.com/chapter/10.1007/978-3-031-07689-3_31Licence: All Rights Reserved

Cite this

Ciampi, M., Ishaq, M., Magdon-Ismail, M., Ostrovsky, R., & Zikas, V. (2022). FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker. In S. Dolev, A. Meisels, & J. Katz (Eds.), Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings (pp. 428-446). (Lecture Notes in Computer Science; Vol. 13301). Springer, Cham. https://doi.org/10.1007/978-3-031-07689-3_31

Ciampi, Michele ; Ishaq, Muhammad ; Magdon-Ismail, Malik et al. / FairMM : A Fast and Frontrunning-Resistant Crypto Market-Maker. Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings. editor / Shlomi Dolev ; Amnon Meisels ; Jonathan Katz. Springer, Cham, 2022. pp. 428-446 (Lecture Notes in Computer Science).

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title = "FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker",

abstract = "Frontrunning is a major problem in DeFi applications, such as blockchain-based exchanges. Albeit, existing solutions are not practical and/or they make external trust assumptions. In this work we propose a market-maker-based crypto-token exchange, which is both more efficient than existing solutions and offers provable resistance to frontrunning attack. Our approach combines in a clever way a game theoretic analysis of market-makers with new cryptography and blockchain tools to defend against all three ways by which an exchange might front-run, i.e., (1) reorder trade requests, (2) adaptively drop trade requests, and (3) adaptively insert (its own) trade requests. Concretely, we propose novel light-weight cryptographic tools and smart-contract-enforced incentives to eliminate reordering attacks and ensure that dropping requests have to be oblivious (uninformed) of the actual trade. We then prove that with these attacks eliminated, a so-called monopolistic market-maker has no longer incentives to add or drop trades. We have implemented and benchmarked our exchange and provide concrete evidence of its advantages over existing solutions.",

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Ciampi, M, Ishaq, M, Magdon-Ismail, M, Ostrovsky, R & Zikas, V 2022, FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker. in S Dolev, A Meisels & J Katz (eds), Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings. Lecture Notes in Computer Science, vol. 13301, Springer, Cham, pp. 428-446, 6th International Symposium on Cyber Security Cryptography and Machine Learning, CSCML 2022, Beer Sheva, Israel, 30/06/22. https://doi.org/10.1007/978-3-031-07689-3_31

FairMM : A Fast and Frontrunning-Resistant Crypto Market-Maker. / Ciampi, Michele; Ishaq, Muhammad; Magdon-Ismail, Malik et al.

Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings. ed. / Shlomi Dolev; Amnon Meisels; Jonathan Katz. Springer, Cham, 2022. p. 428-446 (Lecture Notes in Computer Science; Vol. 13301).

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

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T1 - FairMM

T2 - 6th International Symposium on Cyber Security Cryptography and Machine Learning, CSCML 2022

AU - Ciampi, Michele

AU - Ishaq, Muhammad

AU - Magdon-Ismail, Malik

AU - Ostrovsky, Rafail

AU - Zikas, Vassilis

PY - 2022/6/23

Y1 - 2022/6/23

N2 - Frontrunning is a major problem in DeFi applications, such as blockchain-based exchanges. Albeit, existing solutions are not practical and/or they make external trust assumptions. In this work we propose a market-maker-based crypto-token exchange, which is both more efficient than existing solutions and offers provable resistance to frontrunning attack. Our approach combines in a clever way a game theoretic analysis of market-makers with new cryptography and blockchain tools to defend against all three ways by which an exchange might front-run, i.e., (1) reorder trade requests, (2) adaptively drop trade requests, and (3) adaptively insert (its own) trade requests. Concretely, we propose novel light-weight cryptographic tools and smart-contract-enforced incentives to eliminate reordering attacks and ensure that dropping requests have to be oblivious (uninformed) of the actual trade. We then prove that with these attacks eliminated, a so-called monopolistic market-maker has no longer incentives to add or drop trades. We have implemented and benchmarked our exchange and provide concrete evidence of its advantages over existing solutions.

AB - Frontrunning is a major problem in DeFi applications, such as blockchain-based exchanges. Albeit, existing solutions are not practical and/or they make external trust assumptions. In this work we propose a market-maker-based crypto-token exchange, which is both more efficient than existing solutions and offers provable resistance to frontrunning attack. Our approach combines in a clever way a game theoretic analysis of market-makers with new cryptography and blockchain tools to defend against all three ways by which an exchange might front-run, i.e., (1) reorder trade requests, (2) adaptively drop trade requests, and (3) adaptively insert (its own) trade requests. Concretely, we propose novel light-weight cryptographic tools and smart-contract-enforced incentives to eliminate reordering attacks and ensure that dropping requests have to be oblivious (uninformed) of the actual trade. We then prove that with these attacks eliminated, a so-called monopolistic market-maker has no longer incentives to add or drop trades. We have implemented and benchmarked our exchange and provide concrete evidence of its advantages over existing solutions.

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Ciampi M, Ishaq M, Magdon-Ismail M, Ostrovsky R, Zikas V. FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker. In Dolev S, Meisels A, Katz J, editors, Cyber Security, Cryptology, and Machine Learning - 6th International Symposium, CSCML 2022, Be'er Sheva, Israel, June 30 – July 1, 2022, Proceedings. Springer, Cham. 2022. p. 428-446. (Lecture Notes in Computer Science). doi: 10.1007/978-3-031-07689-3_31