Key Takeaways
- Front running in crypto is a type of MEV strategy where validators or bots spot profitable transactions in the mempool and place a trade just before them to steal the profit.
- Other types of MEV attacks include back-running and sandwich trading, and all tend to be deployed as part of a broader arbitrage strategy.
- More complex exploits like Time Bandit and Uncle Bandit attacks show how miners and validators can manipulate block structure and transaction order to maximize profits.
- To protect against MEV and front-running, users can use different tools, set tighter slippage limits, and avoid large, obvious trades in public mempools.
Liquidity is the lifeblood of the DeFi ecosystem, enabling seamless trades, lending, and borrowing across decentralized exchanges (DEXs). However, liquidity on DEX platforms is often volatile, leading to a common phenomenon called slippage, where the actual execution price of a trade differs from the expected price.
This offers a key entry point for MEV (Maximal Extractable Value) in crypto. MEV occurs when validators or bots rearrange, include, or exclude transactions within a block to maximize their own profit. They achieve this through front running and other types of attacks. In this article, we’ll dive deep into front running in crypto, how MEV bots exploit this strategy, and what you can do to protect yourself.
What Is Front Running in Crypto?
Front running in crypto refers to the practice where a bot or network participant observes a pending transaction in the mempool and quickly places a similar trade just before it. By doing so, the front-runner can profit in more than one way. For example, they can sell the assets on a different platform for a higher price (crypto arbitrage). Alternatively, the front-runner can place a second transaction after the original one and create a sandwich attack.
This is possible because blockchain transactions are visible in a public mempool before they are confirmed on-chain. Bots known as MEV searchers scan the mempool and pay higher gas fees to prioritize their transaction above the original one. As a result, the victim gets a worse price due to slippage while the attacker profits.
What Is a Front Running Bot?
A front running bot is an automated script that scans the mempool for profitable opportunities. These bots analyze pending trades and predict the market impact, then quickly place their own transactions to get a better deal and benefit before future price changes.
Let’s say a user submits a large buy order for a specific token because it’s selling at a favourable price. A front-running bot sees this and sends a buy order for the same token but with a higher gas fee. Once the bot has sniped the crypto at this price, it can sell it elsewhere for a profit. While technically efficient, these bots reduce fairness and increase transaction costs for honest participants.
Other Common MEV Strategies
Beyond front running, MEV bots use several other tactics to extract value from decentralized systems. Some of them combine front running with a secondary transaction, allowing them to extract the highest amount of value. Below are some of the most common strategies:
Back-running
Back-running is the reverse of front-running. Instead of trying to act before a valuable transaction, the attacker waits and places a transaction immediately after a large trade to benefit from its market impact. The idea is to ride the price momentum caused by the initial transaction but exit before the market stabilizes or reverses.
For example, if a whale purchases a token, this may cause the token’s price to spike temporarily. A back-running bot detects the transaction just as it’s confirmed and places its sell order at the inflated price, profiting from the short-term surge. Alternatively, if the large trade is a sell order and drives the price down, the bot may quickly sell its holdings to avoid further losses and re-enter later at a lower price.
Back-running is commonly seen during NFT mints, where bots monitor transactions from high-profile wallets. Once a rare or valuable NFT is bought, the bot may quickly sell its own NFT from the same collection, capitalizing on the temporary demand spike triggered by the original buyer.
Sandwich Attacks
A sandwich attack is a more aggressive form of MEV exploitation that involves surrounding a victim’s transaction with not one but two attacking transactions. The attacker first places a buy transaction before the victim’s transaction and then a sell transaction right after. This allows the attacker to profit from the price movement caused by the victim’s trade, effectively “sandwiching” them.
Let’s say that a user submits a large buy order for a token on a DEX. A bot detects this and immediately submits a buy order with a higher gas fee, getting confirmed first. The user’s trade executes next, pushing the token price up. Then, the bot sells its newly bought tokens at the higher price, capturing a risk-free profit. The result is that the user ends up buying the token at an inflated price, experiencing additional slippage.
These attacks became particularly widespread during the 2020 DeFi boom, especially on platforms like Uniswap, where trades were easily front-run. The predictable nature of AMM-based DEXs made sandwich attacks a low-risk, high-reward opportunity for MEV searchers.
Arbitrage
Arbitrage is considered one of the more neutral or even beneficial MEV strategies, as it helps align prices across different platforms, thus balancing the market. It involves buying a token at a lower price on one exchange and immediately selling it on another where the price is higher, capturing the price difference as profit.
For example, a token might be trading at $10 on Uniswap and $10.50 on SushiSwap. An arbitrage bot will buy the token from Uniswap and sell it on SushiSwap, making $0.50 per token. Arbitrage helps reduce price discrepancies across exchanges, thereby increasing market efficiency.
MEV searchers and arbitrage bots monitor dozens of DEXs simultaneously, and they can execute these trades within seconds or even milliseconds. While arbitrage itself is not harmful, problems arise when bots begin fighting each other with high gas fees to be the first to exploit the opportunity. This increases network congestion and raises gas prices for everyone else.
Liquidation
Liquidation-based MEV strategies usually target lending protocols like Aave, Compound, or MakerDAO, where users borrow assets by locking collateral. If the value of their collateral drops below a safe threshold, their position becomes undercollateralized and can be liquidated. This means another user (or bot) can repay the loan on their behalf and seize the collateral at a discount.
When a liquidation opportunity arises, bots rush to be the first to execute it, earning a liquidation bonus. These opportunities are highly competitive and often result in intense gas bidding wars.
A prime example was during the May 2021 crypto market crash, where plummeting token prices triggered mass liquidations across DeFi platforms. MEV bots capitalized on these, earning massive profits while liquidated users suffered major losses.
Time Bandit Attacks
Time Bandit attacks occur when miners or validators reorganize the blockchain to capture MEV opportunities in a previous block. The name originates from the fact that attackers technically “steal time” by replacing previously confirmed blocks.
To put it into perspective, let’s say a validator sees a profitable arbitrage opportunity in a past block. After that, the validator re-mines it, excluding other users’ transactions and including their own instead.
While rare in practice, Time Bandit attacks are a looming threat in blockchains with weak finality guarantees.
Uncle Bandit Attacks
An uncle attack on Ethereum (pre-Merge) exploited the network’s reward system for uncle blocks. These were valid blocks mined almost simultaneously with others but not included in the main chain. In this exploit, a miner would include a profitable transaction (like an arbitrage opportunity) in a block, deliberately withhold it so it becomes an uncle, then quickly re-mine a new block with their version of the transaction to capture the MEV.
Since Ethereum still rewarded uncle blocks with a reduced payout, the miner profited twice: once from the uncle reward and again from the MEV in the new canonical block. This was possible due to the transparency of the mempool, miner flexibility in transaction ordering, and Ethereum’s uncle reward mechanism.
However, since Ethereum’s shift to Proof of Stake with The Merge, uncle blocks no longer exist, making such attacks obsolete on the mainnet.
Is Front-Running Illegal in Crypto?
In traditional finance, front-running is illegal and considered a breach of market fairness. However, in crypto, there is no way of regulating this practice, since it uses publicly available data.
Because blockchain networks are transparent and permissionless, bots and validators technically operate within protocol rules, but beyond this their conduct is not regulated. Nonetheless, the ethics of MEV and front-running remain hotly debated. While some view MEV searchers as efficient market actors, others see them as parasites degrading the user experience.
How To Protect Your Transactions Against Front-Running Bots
Various tools and best practices are emerging to improve transaction privacy and reduce MEV exposure. To avoid being front-run or exploited by MEV bots, users and developers can take proactive steps:
- Use Private Transaction Relays: Platforms like Flashbots allow users to send transactions privately without broadcasting them to the public mempool.
- Set Slippage Tolerances Carefully: Reducing the acceptable slippage on DEXs makes it harder for bots to profit from your trade.
- Avoid Large, Obvious Trades: Split up large orders to avoid drawing attention in the mempool.
- Use Limit Orders Where Possible: Market orders are more likely to suffer from MEV manipulation.
- Transact During Off-Peak Hours: Lower network activity reduces competition and bot activity.
Flashbots Protect
Flashbots Protect is a service offered by Flashbots, designed to help users protect their transactions from MEV exploitation. It routes transactions through a private relay directly to miners or validators, bypassing the public mempool. As a result, bots can’t see the transaction until it’s included in a block, making front-running nearly impossible.
Furthermore, Flashbots also provides analytics and tools to help developers understand and mitigate MEV risks.
Closing Thoughts
MEV is an unavoidable consequence of the transparent and decentralized nature of blockchain networks. While it improves the efficiency of the market, it also opens the door to predatory tactics like front-running. To protect themselves from the threat of front-running attacks, users should stay updated and utilize defensive strategies in their trades.
