FairMM: A Fast and Frontrunning-Resistant Crypto Market-Maker, by Michele Ciampi and Muhammad Ishaq and Malik Magdon-Ismail and Rafail Ostrovsky and Vassilis Zikas

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.