Trading on-chain: how feasible is regulators' worst-case scenario?

When consumers trade financial products, they typically use well-identified service providers that operate under government regulation. In theory, decentralized platforms like Ethereum can offer trading services 'on-chain' without an obvious entry point for regulators. Fortunately for regulators, most trading volume in blockchain-based assets is still on centralized service providers for performance reasons. However this leaves the following research questions we address in this paper: (i) is secure trading (i.e., resistant to front-running and price manipulation) even feasible as a fully 'on-chain' service on a public blockchain, (ii) what is its performance benchmark, and (iii) what is the performance impact of novel techniques (e.g., 'rollups') in closing the performance gap? To answer these questions, we 'learn by doing' and custom design an Ethereum-based call market (or batch auction) exchange, Lissy, with favourable security properties.We conducta variety of optimizations and experiments to demonstrate that this technology cannot expect to exceed a few hundred trade executions per block (i.e., 13s window of time). However this can be scaled dramatically with off-chain execution that is not consumer-facing. We also illustrate, with numerous examples throughout the paper, how blockchain deployment is full of nuances that make it quite different from developing in better understood domains (e.g., cloud-based web applications).