Front-Running
The practice of placing a transaction before a known pending transaction to profit from or alter its expected execution.
Explain Like I'm 12
The practice of placing a transaction before a known pending transaction to profit from or alter its expected execution.
Why It Matters
MEV concepts explain how transaction ordering can create economic opportunities and risks.
How It Works
Bots constantly scan the pending transaction pool (mempool) for large trades. When a large trade is detected, the bot sends a transaction to buy the same asset, paying a higher gas fee to be included in the same or previous block. Once the user's trade pushes the price up, the bot sells the asset for a profit.
Real-World Example
Uniswap users often experience 'sandwich attacks,' where a bot buys before a user's trade and sells immediately after, trapping the user in a profit-stealing loop.
Advantages
- Provides market efficiency for arbitrageurs
- Incentivizes faster transaction processing
- Highlights the need for better trade protections
Limitations
- Harms retail user experience
- Increases transaction costs through gas wars
- Can lead to high slippage for users
Common Misconceptions
- Front-running is not always technically illegal in decentralized finance, but it is considered an extraction of user value.
- Users believe paying higher gas fees always prevents front-running, but bots simply adjust their fees to remain ahead.
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Related Terms
Block Builder
A specialized participant that constructs candidate blocks or transaction bundles for proposers.
Mempool
The mempool, or memory pool, is a temporary staging area where unconfirmed transactions reside before they are selected by a validator or miner to be included in a blockchain block. It acts as a gateway for transactions entering the network. Each node maintains its own local version of the mempool, where transactions are validated against network rules before propagation. As block space is limited, competition for inclusion often leads to users paying higher transaction fees to prioritize their transactions within the mempool, a process known as fee-based prioritization.
Searcher
An actor or automated system that identifies and submits transaction bundles designed to capture MEV opportunities.
Transaction Ordering
The rules or mechanism determining the sequence in which pending transactions are included and executed.
Back-Running
An MEV strategy where a transaction is deliberately placed immediately after a target transaction to capture an opportunity.
Liquidation Bot
Automated software that monitors lending positions and submits liquidation transactions when positions become eligible.
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