The Danger of Gas Fees in Crypto
May 07 2019 - 12:26PM
ADVFN Crypto NewsWire
Bitcoin Global News (BGN)
May 7, 2019 -- ADVFN Crypto NewsWire -- Crypto trading isn’t
as egalitarian as it is purported to be. Consider gas fees and how
they work on the Ethereum network. If a user is willing to pay a
higher fee than the recommended amount for his or her transaction,
then he or she can jump the line and make a trade first.
Coming out on top in uncertain
market conditions is that simple, in a sense. This principle can
easily be extended to trading bots, as CoinDesk did in their
article on the subject today, to say that such trades can be
scheduled in advance. The system of gas fees is therefore, easy for
some to manipulate.
Since the overall gas system was,
however, created to increase the efficiency of the network by
prioritizing high-fee transactions and queuing low fee
transactions, it is logical to wonder if anything can be done about
this exploit. One of the most nightmarish outcomes that could occur
in the future would be for an order that was placed on a
decentralized exchange to be essentially stolen by a faster
trader.
The fact is, however, original
research from Cornell suggests this is already occurring. As
CoinDesk puts it, the Cornell team involved found that “arbitrage
bots” are exploiting several decentralized exchanges to keep
certain traders ahead of everyone else. Remember that age old
crypto saying of “buying the dip?”
Doing so might not actually be
possible for everyone, except those with deep pockets, significant
technical know-how, or both. The Cornell team goes on to specify
that the bots mentioned above even bid up gas prices on certain
markets until one wins out and ends up paying whatever the final
price is. What this amounts to is basically blatant market
manipulation so that the average trader is freezed out. In that
sense, it could be argued that crypto is turning into a mini-Wall
Street already. Those that move faster truly seem to win more. If
we want to continue to promote Satoshi’s vision in all that we do,
then we should be examining ways to make these bots
obsolete.
By: BGN Editorial Staff
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