Definition ∞ An Arbitrage Exploit is an action that manipulates price discrepancies across different markets or exchanges to generate risk-free profit. In decentralized finance, this often involves exploiting temporary imbalances in token prices on various decentralized exchanges or lending platforms through sophisticated transaction sequencing. These exploits can lead to significant financial losses for affected protocols or users.
Context ∞ The prevalence of arbitrage exploits is a recurring theme in DeFi news, highlighting the dynamic and sometimes volatile nature of decentralized markets. Regulatory bodies and protocol developers are continuously evaluating mechanisms to mitigate such risks and ensure market stability.
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