Forensic Analysis.

1. The Jitter Tax Model

Objective: Quantify the annualized "Alpha Decay" caused by non-deterministic latency (jitter).

1.1 The Formula

The proprietary "Jitter Tax" is calculated as a function of daily trading volume, average profit per trade, and the latency delta relative to a kernel-bypass baseline.

L_annual = V_daily × P_avg × min(1.0, Δ_latency × M_vol) × 365

• L_annual: Annualized loss in USD.
• V_daily: Daily trading volume (User Input).
• P_avg: Average profit per trade (User Input, typically basis points).
• Δ_latency: Latency delta in milliseconds (T_signer - T_baseline).
• M_vol: Volatility Multiplier (Decay rate per millisecond).

1.2 Constants & Coefficients

• Baseline Latency (T_baseline): 0.042ms (42µs). Sourced from ZeroCopy internal benchmarks on AWS c6i.metal instances using userspace networking (DPDK).
• Volatility Multipliers (M_vol):
  • Low: 0.05% / ms (Stable markets).
  • Medium: 0.10% / ms (Standard HFT volatility).
  • High: 0.20% / ms (Crisis alpha / cascading liquidations).

1.3 Reproducibility

1# Install the CLI
2# From the workspace root
3cargo install --path cli/zcp
4
5# Run a 10-second benchmark (local signing, no network)
6zcp bench --duration 10 --output benchmark.json
7
8# Compare against simulated AWS KMS latency
9zcp audit --benchmark-kms --volume 100000

Test Environment:

• Instance: AWS c6i.metal (us-east-1)
• Kernel: 5.15.0-aws (isolcpus=2-7, nohz_full)
• Networking: DPDK 21.11 (userspace bypass)
• Signing Library: k256 v0.13 (pure Rust ECDSA)
• Samples: 1,000,000 signing operations per run

1.4 Latency Sources (T_signer)

Note: Fireblocks latency assumes standard async polling architecture. Higher performance is possible with specialized "Co-Signer" setups, but remains network-bound.

2. MEV Extraction Model

Objective: Quantify the "Sandwich Attack" and "Slippage" costs for transactions broadcast to the public Ethereum mempool.

2.1 The Formula

The extraction cost is a composite of three leakage vectors:

C_mev = (V_trade × R_sandwich) + (V_trade × R_slippage) + G_wasted

• C_mev: Total extraction cost per trade USD.
• V_trade: Trade size in ETH (User Input).
• R_sandwich: Sandwich attack extraction rate.
• R_slippage: Additional slippage induced by front-running.
• G_wasted: Gas cost of failed/reverted transactions.

2.2 Constants & Assumptions

• Sandwich Rate (R_sandwich): 0.50% (50 bps). Average extractor profit in high-vol pools.
• Slippage Rate (R_slippage): 0.30% (30 bps). Unintended price impact.
• Gas Wasted (G_wasted): 0.02 ETH. Avg revert cost during congestion.

2.3 Mitigation

The "Protected Mode" simulation assumes usage of a private transaction bundle (e.g., Flashbots Protect, ZeroCopy Enclave), which routes transactions directly to builders, bypassing the public mempool and eliminating sandwich vectors entirely.

3. References

• BIS Working Papers No 955: High-frequency trading, variance, and market structure. Bank for International Settlements.
• Flashbots Research: Quantifying MEV: The Dark Forest.
• Tabb Group: The Value of a Millisecond in Electronic Trading.