Maximizing Extractable Value from Automated Market Makers

TL;DR

This paper analyzes how adversaries can manipulate transaction orderings in Automated Market Makers (AMMs) to maximize their profit, highlighting vulnerabilities in DeFi platforms.

Contribution

It introduces a strategy for adversaries to optimize value extraction from user transactions in AMMs, addressing a key security concern.

Findings

Adversaries can significantly increase their profits through transaction-ordering manipulation.

The proposed strategy effectively exploits transaction sequencing vulnerabilities.

AMMs are susceptible to front-running and value extraction attacks.

Abstract

Automated Market Makers (AMMs) are decentralized applications that allow users to exchange crypto-tokens without the need for a matching exchange order. AMMs are one of the most successful DeFi use cases: indeed, major AMM platforms process a daily volume of transactions worth USD billions. Despite their popularity, AMMs are well-known to suffer from transaction-ordering issues: adversaries can influence the ordering of user transactions, and possibly front-run them with their own, to extract value from AMMs, to the detriment of users. We devise an effective procedure to construct a strategy through which an adversary can maximize the value extracted from user transactions.