Front-Running

Front-Running is a blockchain attack where a malicious actor exploits the transparency of the transaction pool (mempool) to manipulate the order of transactions. This often involves submitting a higher gas fee to prioritize their transaction over others, gaining an unfair advantage.

How Front-Running Works

1. Observation in the Mempool: All pending transactions are visible in the mempool before being mined. Attackers monitor these transactions for valuable operations (e.g., token swaps, arbitrage).

2. Submitting a Competing Transaction: The attacker submits their transaction with a higher gas fee to ensure it is mined before the original transaction.

3. Execution Advantage: By front-running, the attacker can manipulate prices, exploit vulnerabilities, or profit from arbitrage.

Example

Imagine a user submitting a transaction to buy a token on a decentralized exchange (DEX):

• User: Buys 100 tokens at a price of 1 ETH per token.

• Attacker: Spots the transaction in the mempool and submits a buy order with a higher gas fee.

• Outcome: The attacker’s transaction is mined first, increasing the token price. The user ends up buying tokens at a higher price, while the attacker sells them at a profit.

Types of Front-Running Attacks

1. Trade Front-Running: Exploiting trades on decentralized exchanges.

2. Arbitrage Front-Running: Taking advantage of arbitrage opportunities visible in pending transactions.

3. Transaction Reordering: Reordering transactions to prioritize a malicious one.