Trading high-frequency strategies on a high-performance public blockchain is like racing at full throttle without a windshield, against the wind. When the entire chain's performance is pushed down to the microsecond level, even a slight parameter difference can cause your account to instantly shift from a wealth-building machine to a digital black hole.

By the end of 2025, with the explosive concentration of on-chain ecosystem liquidity, high-frequency trading is no longer the exclusive game of large funds. But this also means that retail players are more likely to fall into traps. Many developers focus solely on thousand-fold leverage and ultra-fast matching, without realizing — on this highway of the chain, the most deadly threat is often not the opponent’s strategy, but your ignorance of physical limits.

I spent half a year reviewing various on-chain arbitrage and market-making methods. The conclusion is very sobering: if you don’t want to be forcibly liquidated by the system during the next market surge, these three parameters must be ingrained in your risk control mindset.

**The first key parameter: Liquidity Depth Decay Coefficient**

In a high-performance order book system, liquidity is not static but like quicksand. The depth you see at the bid and ask? Most of the time, it’s an illusion. Due to asynchronous execution, by the time your buy order is issued and actually filled, the underlying liquidity has already evaporated completely because of large trades or bulk cancellations.

My advice is to set the decay coefficient lower. Although this means you’ll catch fewer arbitrage opportunities, at least you won’t get liquidated suddenly due to liquidity vanishing. Staying alive and making money is always more valuable than dying at the limits of your parameters.