The Benefits of a Centralized Exchange

  1. Buyer A submits a DEX buy order for 1 ETH @ 238(gas 0)
  2. Seller B submits a DEX sell order for 1 ETH @ $237 (gas 0)
  3. ‘Front-Runner’ 1 observes Buyer A’s order and Seller B’s order
  4. ‘Front-Runner’ 1 submits DEX buy order for 1 ETH @ $237 (gas > 0) to trade with Seller B’s sell order
  5. ‘Front-Runner’ 1 submits a DEX sell order for 1 ETH @ $238 (gas > 0) to trade with Buyer A’s buy order
  6. Miner 1 prioritizes ‘Font-Runner’ 1’s buy and sell orders to earn the gas fee
  7. Seller B sells 1 ETH to ‘Front-Runner’ 1 @ $237
  8. ‘Front-Runner’ 1 now owns 1 ETH @ $237
  9. Buyer A buys 1 ETH from ‘Front-Runner’1 @ $238
  10. ‘Front-Runner’ 1 is now flat, i.e. no position

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store