Detecting Arbitrage on Ethereum Through Feature Fusion and Positive-Unlabeled Learning

Abstract

Due to the lack of supervision in the decentralized exchanges (DEXs), arbitrageurs can utilize information and take advantage of price gap to make profits over such platforms such as Ethereum blockchain. DEX arbitrage poses possibilities and opportunities for defrauding and can seriously impair the operation of the Ethereum ecosystem. It motivates this work to explore and characterize the unique features of arbitrage which differ from other frauds such as money laundering and Ponzi games for better detection. This work makes the first attempt for detecting arbitrage on Ethereum through feature fusion and positive-unlabeled learning (PU learning). We first conduct an in-depth analysis and exploit two-fold arbitrage features by fusion including: 1) statistical features that explicitly represent the node activity levels according to expert knowledge; and 2) structural features that implicitly encode the transactions information by graph machine learning. We then apply PU learning to generate negative instances for compensating the imbalanced arbitrage datasets. We evaluate our proposed method through extensive experiments over a real-world dataset and demonstrate that it can achieve 90% accuracy in detecting arbitrage activities on Ethereum.