Arbitrage Bot Depletes LFNTY-USDC Pool on Lifinity DEX

• The $699,090 loss was triggered by an unanticipated reaction to a botched deal.
• On Serum v3, the bot placed an Immediate-or-Cancel (IOC) market order.

An arbitrage bot depleted the LFNTY-USDC pool on December 8 from the decentralized exchange (DEX) Lifinity. The $699,090 loss was triggered by an unanticipated reaction to a botched deal, according to Lifinity’s Discord channel.

Durden, a key member of Lifinity, revealed that a bot tried to benefit from price disparities between multiple trading pairs by attempting an arbitrage transaction.

Set to Zero

Moreover, on Serum v3, the bot placed an Immediate-or-Cancel (IOC) market order, which, if filled, requires execution at the current market price. Cancelled orders are those that cannot be fulfilled right away.

However, instead of the usual error message, it returned the exact amount out. According to Durden, its pools took in zero amount and sent zero amount out, which caused the software to reset the previous transaction price to zero and set the beginning price for the following one to zero as well.

Lifinity v1 employs algorithms to generate liquidity in trading pairs, making it an automated market maker (AMM). Durden claims that it uses a particular kind of AMM model called a constant product market maker (CPMM) to keep the quantity of two tokens in a liquidity pool equal.

Although it lacks the functionality of a conventional constant product (CP) curve, Lifinity v1 may nonetheless mimic its effects. This curve is often employed in traditional CPMMs.

One way to make it seem the same was to use the next beginning price as the argument to a “last price” function. But the bot was able to deplete the account since the glitch gave a price of zero.