Latency arbitrage is a trading strategy that exploits the delay in information dissemination across different trading platforms. In the context of blockchain, it involves taking advantage of the time it takes for data to propagate between decentralized exchanges or between a decentralized exchange and centralized exchanges.

This strategy relies on the fact that prices may change on one exchange before they are reflected on another due to network latency, order processing times, or other factors. Traders can exploit these time lags to execute trades at advantageous prices before the market adjusts.

However, latency arbitrage is controversial because it can disrupt market efficiency and fairness. Critics argue that it gives an unfair advantage to traders with faster access to information and execution capabilities, potentially harming market integrity.

Regulators and exchanges have taken steps to address latency arbitrage by implementing measures such as speed bumps, which introduce artificial delays to level the playing field for all traders. Additionally, advancements in technology and infrastructure aim to reduce latency across the board, making it more difficult to profit from these small time differentials.