Latency competition describes the intense contest among market participants to execute trades faster than others. In financial markets, including digital asset exchanges, even milliseconds can confer a significant advantage. Traders employ high-speed infrastructure and algorithms to minimize the delay between receiving market data and placing orders. This pursuit of speed aims to capitalize on fleeting price differences.
Context
Latency competition is a defining characteristic of high-frequency trading in digital asset markets, particularly on centralized exchanges. News often discusses how technological advancements, such as co-location services and optimized network infrastructure, provide advantages to certain trading firms. The speed at which transactions are processed can significantly impact profitability for professional traders. This competition drives continuous innovation in trading technology within the crypto ecosystem.
A new mechanism auctions a guaranteed time advantage for transaction inclusion, transforming competitive latency-based MEV extraction into an economically efficient, auction-driven value capture system.
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