Mind boggling stuff. Essentially, what happens is that in centralized exchanges algorithms are on the side of MMs(market makers) and traders as they hire bright minds(programmers). With Dexes power shifts towards all liquidity providers (small and large), which are MMs for Dexes, so programmers are on the other side - their task now is to attract a lot of liquidity.
This is very interesting.
So basically the idea is delaying the price update of the system to increase the number of arbitrage trades necessary after a big initial trade generated slippage, thus bringing more profits to liquidity providers.
However i dont understand how this delay mecanic doesnt potentially open the way to nasty exploits one way or another. Possibly combined with the infamous flash loans. It feels like a dangerous mecanic.
I was thinking this as well. It seems like the system assumes the arbitrage opportunity is to bring it back to the original price, but what if the price changes drastically and the delay actually magnifies the arbitrage opportunity?
It is not explained anywhere, I would like to see the audits on this to see how they protect on these attacks.
Maybe a max difference between the virtual and actual balances?
What I like about uniswap's approach is that it's so simple, and the code is so minimal, it's very hard to have an issue in them.
Agreed, I would like to better understand how they are planning on redistributing the front-running (arbitrage) gains to LP's.
I am going to test it out as a Liquidity Provider once there is a bit of volume and will report back