This session presents some ideas, lessons learned and techniques used to build high frequency trading strategies in decentralized finance(DeFi). The deck describes some key practical tips that can help quants build HFT strategies for the new word of DeFi.

1. High Frequency Trading and
DeFi: Ideas, Strategies, Building
Blocks and Things You Should
Know About

2. Agenda
● A DeFi perspective of HFT
● Key building blocks of DeFi HFT strategies
● Some crazy ideas about DeFi HFT strategies

3. A quick update about ITB…

4. Capital Market Insights

5. Now You can Download Data from All ITB Indicators

6. DeFi & HFT…

7. Speed and trading have always gone
hand in hand…

9. Some forms of HFT
remerged in the 1980s and
became more mainstream in
the mid 2000s…

10. Many Types of HFT Strategies
Index
Arbitrage
Event-
Based
Arbitrage
Statistical
Arbitrage
Quote
Stuffing
Low Latency
Strategies
…

11. HFT Strategies have mostly been about speed but still
deal with intermediaries…

12. DeFi introduces new dimensions to traditional HFT models…

13. The DeFi HFT Perspective
Block-By-Block State Changes
No Trusted Intermediaries
Near-Complete Transparency
Immutable, Forecastable Market-State Changes
Variable Transaction Costs
Participants Code-Transparency
Arbitrage as a Feature
Protocol Diversity

14. Beyond Speed

15. A Simple Comparison
Feature Traditional HFT DeFi HFT
Information Imperfect Near-Perfect
Cost Fixed Variable
Speed Nano seconds Limited by block-time
External Infrastructure
Dependencies
---- Miner execution

16. Infrastructure is the most important factor in the
execution of DeFi HFT strategies…

17. Some key building blocks needed to build DeFi
HFT strategies…

18. Mempool Monitors
Requirement
• Monitor transactions that
could trigger an
opportunity in a set of
DeFi protocols
Solution
• Host access to Ethereum
nodes with mempool
access capabilities

19. Gas Accumulation
Requirement
• Accumulate cheaper
Gas to use in future
DeFi trades
Solution
• Use Chi tokens to
purchase Gas based
on market forecast

20. Gas Bidding Logic/Frontrunning Protection
Requirement
• Compete against alternative
strategies for executing
specific transactions
Solution
• Use mempool monitoring
and gas estimation
techniques to develop a
transaction-bidding method

21. Private Pool Interactions
Requirement
• Hide transactions from
potential competitors
Solution
• Incorporate private pool
routing engines to mine
transactions outside the
visibility of Ethereum
miners

22. Transaction Input Obfuscation
Requirement
• Prevent competitors
from identifying your
transactions
Solution
• Obfuscate your
transaction data to avoid
obvious competitors and
frontrunning bots

23. Transaction Replay
Requirement
• Evaluate the impact of
potential opportunities and
competitive transactions in
real time
Solution
• Use Ethereum nodes to
replay transactions offline
and evaluate the state of the
network

24. Other Relevant Building Blocks
• CeFi signals
• Multi-protocol integration
• Multi-chain execution

25. Some more futuristic ideas about the future of
HFT in DeFi…

26. Automatic HFT Strategy Learning
Concept
• Use modern machine
learning methods to
automatically learn
new HFT strategies
based on the state of
the blockchain

27. Tokenized HFT Strategies
Concept
• Expose active HFT
strategies in the form
of tokens and smart
contracts that any
retail investors can
access

28. Summary
● DeFi represents a new playground for HFT strategies
● Infrastructure is key for executing HFT DeFi strategies in a highy competitive
environment
● HFT should be seen as a feature of DeFi

30. Thank You!
Jesus Rodriguez
jr@intotheblock.io
medium.com/@jrodthoughts
intotheblock.com