Author: Mike Hearn 2013-04-17 09:19:43
Published on: 2013-04-17T09:19:43+00:00
The concept of high-frequency trading (HFT) has been redefined in the context of decentralized asset exchanges. While HFT traditionally involves exploiting correlations through micro-trades on centralized exchanges, HFT using transaction (tx) replacement is a way that multiple parties can negotiate amongst themselves as fast as they can compute and verify signatures. In this system, unrecorded open transactions can be replaced until nLockTime, containing payments by multiple parties who each sign their input. For a new version to be written, each must sign a higher sequence number. One use of nLockTime is for high-frequency trades between a set of parties, who can keep updating a tx by unanimous agreement. If one party stops agreeing to changes, then the last state will be recorded at nLockTime. A default transaction can be prepared after each version so n-1 parties can push an unresponsive party out. Intermediate transactions do not need to be broadcast and only the final outcome gets recorded by the network.
Updated on: 2023-06-06T15:00:08.967615+00:00