What is Front-Running In Blockchain – Explained

"Ever felt like someone cut in line just as you were about to score a sweet deal?"

That’s pretty much what front-running feels like in the blockchain world. Just when you're about to execute a transaction, someone jumps in, takes your place, and profits at your expense. It's sneaky, it's pervasive, and it’s costing traders billions.

But hold up. Before you throw your hands up in frustration, let's unpack how front-running works, why it's such a big deal in DeFi, and what you can do to protect yourself.

Here’s where things get a little more advanced (and scary). Ever heard of Maximum Extractable Value (MEV)? It's the maximum profit that validators or bots can extract by reordering or manipulating transactions on a block.

MEV traders run bots that comb through transaction pools, looking for opportunities to jump the line and profit. These bots are extremely efficient, and some of the top teams make hundreds of thousands of dollars monthly. Yep, you read that right. In optimal conditions, MEV bots have made over $1 billion in profits since 2020 across Ethereum, Binance Smart Chain, Arbitrum and Solana.

Displacement: The “Cut-in-Line” Tactic

Displacement is a simpler yet equally frustrating form of front-running. In this attack, a front-runner essentially bribes the network by offering a higher gas fee than the victim’s transaction. Since blockchain transactions are processed based on the gas fees attached, miners prioritize transactions that are more profitable to process. Here’s how it works:

• You place a transaction to buy ETH at a given price.
   
• A bot monitoring the mempool notices your order and places its own buy order with a higher gas fee.
   
• Miners will prioritize the bot’s transaction, executing it first. This bot essentially cuts in line, buys the asset ahead of you, and profits from the price difference caused by your trade.

This method is especially effective when gas fees are high, making it much easier for attackers to push through their transactions by paying extra. The profit margins from these kinds of displacement attacks can scale exponentially with large trades.

Suppression: Flooding the Mempool

Suppression attacks are another sophisticated way front-runners manipulate DeFi markets. Here, the attacker floods the mempool with a series of high-fee transactions designed to prevent the victim’s transaction from being processed in the next block. This creates a bottleneck where only high-fee transactions can get through.

Here’s how a suppression attack works:

• You submit a transaction to buy 500 ETH.
   
• A front-runner bot notices your transaction and submits a flurry of high-fee transactions to push your order out of the block.
   
• Due to this block congestion, your transaction may not go through in time, potentially causing you to miss out on the trade or face a worse price if market conditions change.

In many cases, suppression attacks force victims to either increase their gas fee or watch their trade get delayed or outpriced. This tactic isn’t just used for trades but also in liquidations, auctions, and other time-sensitive operations in DeFi. Suppression effectively becomes a race, where only those willing to pay higher gas fees can make it through.

Insertion Attack: A Closer Look

Imagine you’re about to place a large buy order on a decentralized exchange (DEX) for 1,000 ETH at $1,620. In a perfect world, you expect to get your ETH at that price, but there’s a catch—your large order itself is likely to move the market price. A savvy bot, designed to front-run, detects your order in the mempool before it gets executed. The bot swiftly places its own buy order for ETH at the current price of $1,620, ahead of yours.

Here’s where the trick comes in:

• The bot buys ETH at $1,620, knowing that your large buy order will push up the price.
   
• As soon as your transaction is confirmed, the price increases due to the sheer volume of your order, and you end up paying a higher price—say $1,625.
   
• Once your transaction pushes up the price, the bot immediately sells its ETH, now at $1,625, pocketing the difference.

This process, while only causing a slight price increase, can rake in significant profits when larger sums are involved. For instance, even a $5 price difference on a trade of 1,000 ETH would net the bot $5,000 in profit in just a matter of seconds. Multiply this across several trades and the profits can snowball quickly.

Catgirl Marketplace Vulnerability

Take the Catgirl NFT marketplace, for example. Before their smart contract audit, the platform allowed users to swap Catgirl NFTs for BNB tokens. However, there was no minimum output enforcement mechanism, which meant that during a large swap, an attacker could swoop in, front-run the trade, and cause the buyer to pay way more for the NFT.

Luckily, the problem was caught, and a slippage check was introduced to prevent front-running attacks. This added safeguard ensures that buyers don’t get gouged by sneaky traders.

Diverse Solutions Staking Pool

Another example comes from the DeFi staking pool Diverse Solutions. Their platform had a glaring front-running vulnerability in its deposit function. A malicious attacker could inflate the pool’s denominator (total assets) right before a major deposit, leaving the victim with almost no shares while the attacker reaped all the rewards.

The bug was patched after a thorough audit, with the function now ensuring that only the assets deposited via the function impact the pool’s state, protecting it from external manipulation.

Front-running isn't just an inconvenience — it's a systemic problem that undermines the entire DeFi ecosystem.

Here’s why it matters:

1. Fairness: The whole point of DeFi is to create a level playing field, but front-running skews that balance by giving an unfair advantage to those with the right tools or insider knowledge.
    
2. Transparency: While blockchains are transparent, that very transparency also exposes transactions to front-running attacks.
    
3. Funds Safety: Users lose millions to front-runners every year. For retail investors, this loss is particularly devastating, as they often don’t have the technical know-how to defend against these attacks.

It’s not all hopeless. Here are some ways to shield yourself from front-running attacks:

1. Use Minimal Slippage: When making trades on a DEX, set a low slippage tolerance. This way, if the price changes too much during your transaction, it won’t go through — protecting you from sandwich attacks.
    
2. Private Transaction Options: Some platforms offer private transaction options, where your trade is hidden from the mempool until it’s confirmed. This can prevent bots from detecting and exploiting your order.
    
3. Batch Transactions: Platforms like Flashbots allow users to bundle multiple transactions together, making them harder for front-runners to exploit.
    
4. Higher Gas Fees: While this might seem counterintuitive, paying a slightly higher gas fee can ensure your transaction gets confirmed faster, reducing the risk of displacement attacks.
    

As DeFi continues to grow, front-runners will only become more sophisticated. But by understanding how these attacks work and implementing protective measures, you can level the playing field and keep your funds safe.

Security firms like QuillAudits help protect smart contracts from vulnerabilities like sandwich attacks, where malicious actors exploit pending transactions to manipulate prices.

QuillAudits’ QuillShield, an AI agent, detects vulnerabilities and evolving front-running strategies, providing real-time alerts to keep users safe.

So, next time you're about to make a trade, remember — the mempool might be watching.

Stay sharp, stay secure, and always be one step ahead.