Decentralized exchange review: IDEX, Kyber, Bancor


#1

In one of our previous blog posts we have described the inner workings of GDAX, EtherDelta, 0x and Radex. By popular demand we present an architecture review of some other popular DEXs on Ethereum blockchain.


This is a companion discussion topic for the original entry at http://rados.io/decentralized-exchange-review-idex-kyber-bancor/

#2

Thanks for taking the time writing this review! I work at Bancor.

Regarding frontrunning on Bancor
Trader frontrunning attacks on Bancor have largely been solved thanks to developments in the underlying Ethereum blockchain, and mitigated successfully thanks to changes implemented earlier this year in the Bancor Protocol which make trader frontrunning unprofitable or prevent it all together.

Your claim that on Bancor “it is pretty much a guarantee that someone will force the price to drop to your suggested cap levels” and create “price unpredictability” may have been closer to the truth when trader frontrunning was possible, but that is no longer the case.

Today, while it is true that MINER frontrunning is still possible on Bancor, we believe it represents only a small threat to the network, and it is false to say these attacks “squeeze out $5-$10 dollars out of you on your every trade”. Miner frontrunning is not popular for two main reasons:

  1. It’s actually very hard to tell who is going to be the next miner on the Ethereum blockchain to process a transaction. So the chances of you being the next miner and also having a lucrative transaction on Bancor that you can front-run is quite slim.

  2. It is relatively easy to uncover frontrunning of any kind by Ethereum miners. We believe most miners — who invest significant resources to earn revenue from block subsidies on Ethereum — understand that if everyone views Ethereum miners as cheaters it would hurt Ethereum and effectively bite the hand that feeds them. Miners have an interest in maintaining the integrity of the network and perpetuating manipulative behavior will ultimately harm this integrity.

If you have any evidence that suggests trader or miner front-running remains a significant problem on Bancor (beyond the June 2017 and Oct 2017 articles you link to in your original article, which were published well before the developments referenced above), we would be happy to see it.

In general, we believe the blockchain world can create Dapps where anyone who wishes to transfer value can do so without having to master gas strategies and without being subject to the abuses that run rampant on today’s crypto exchanges.

As we look to the future, there is much more work to be done to build constraints into Dapps and exchanges that prevent manipulative behavior, while imposing the least collective costs on the community as possible. Bancor remains committed to continually enhancing our smart contracts to enable on-chain conversions that are secure, predictable and low-cost.

Regarding Bancor focus
Bancor’s liquidity network is designed to function cross chain. While we are contributing signficant resources to building infrastructure on EOS and overseeing LiquidEOS as an elected EOS Block Producer, Bancor is as focused as ever on building its decentralized liquidity network in ETH and across any blockchain where Dapp developers are building.


#3

Glad that trader frontrunning has been addressed. Regarding miner frontrunning it is still definitely possible, but I would buy the argument that POW mining is such cutthroat business that you cannot expand any resources to frontrun people today - wasted CPU cycles will prevent you from being the first to mine the block. However, if Bancor’s trading volume increases drastically and potential reward from frontrunning traders will become larger than ETH mining reward we might see it happen.

As Ethereum moves to POS frontrunning Bancor will become way more lucrative. Essentially, Bancor is very sensitive to the blockchain’s consensus algorithm.

Regarding

We believe most miners — who invest significant resources to earn revenue from block subsidies on Ethereum — understand that if everyone views Ethereum miners as cheaters it would hurt Ethereum and effectively bite the hand that feeds them.

I think people will view Ethereum as an imperfect system with its own limitations and its own advantages, and will instead concur that Bancor implementation is flawed because there is no protection against such attack. All other ETH functionality will be working.

I do consider Bancor to be a great piece of technology nonetheless and a very interesting approach to providing algorithmic liquidity. Using Bancor for EOS RAM handling was ingenious! Good luck to you with both ETH exchange and your EOS projects.