Stale Price Arbitrage

Stale price arbitrage involves taking advantage of a discrepancy between an outdated price listed on a decentralized protocol and the current market price on high-frequency exchanges. When an oracle fails to update in real-time, the protocol remains blind to recent market volatility.

Arbitrageurs identify these stale prices and execute trades that are profitable because the protocol is essentially offering assets at incorrect values. This process effectively drains the protocol of its liquidity or unfairly rewards the arbitrageur at the expense of other users.

It is a direct consequence of relying on asynchronous data feeds in a high-speed trading environment. Maintaining accurate and timely data is the primary defense against this type of exploitation.