#100DaysOfSolidity #077 Decoding Front Running in Smart Contracts: Risks, Exploits, and Prevention 🔄⚠️

#100DaysOfSolidity Hacks & Tests 077 : “Front Running”

📅 Day 77 of #100DaysOfSolidity

Welcome back to our #100DaysOfSolidity series! In today’s exciting installment, we’re diving deep into the world of Ethereum smart contract security once again. This time, we’re shedding light on a notorious phenomenon known as “front running.” 🕵️‍♂️

#100DaysOfSolidity Hacks & Tests 077 : “Front Running”

🚦 Understanding Front Running

Front running is a cunning manipulation that occurs in financial markets, including the realm of cryptocurrencies. In the context of Ethereum and its smart contracts, front running refers to a situation where an entity, often a malicious actor, exploits advance knowledge about a forthcoming transaction to gain an unfair advantage.

Here’s how it works: Imagine Alice wants to buy a specific token at a certain price, and she initiates a transaction to do so. However, before Alice’s transaction gets confirmed, a miner (or a front-running bot) spots her transaction in the mempool. This malicious miner can then quickly create a new transaction with a higher gas price to execute the same trade, effectively jumping ahead of Alice’s transaction. As a result, the miner profits from the price increase caused by Alice’s transaction.

⛏️ The Mechanics of Front Running

To better understand how front running works within Ethereum smart contracts, let’s break down the process step by step:

1. Transaction Broadcast: When Alice broadcasts her transaction to the Ethereum network, it enters the mempool — a waiting area where pending transactions await confirmation.

2. Malicious Monitoring: Front-running bots continuously monitor the mempool for incoming transactions, searching for lucrative opportunities. These bots aim to identify transactions with the potential for profit.

3. Transaction Duplication: Once a lucrative transaction is detected, the malicious actor quickly creates a new transaction with a higher gas price. This higher gas price ensures that the miner prioritizes their transaction over the original transaction.

4. Mining and Confirmation: Miners, incentivized by the higher gas fee, include the malicious transaction in the next block. As a result, the malicious actor’s transaction is confirmed before the original transaction, allowing them to profit from the price movement caused by the original transaction.

🔍 Identifying Vulnerabilities

Front running exploits are particularly concerning for Ethereum smart contracts. Several vulnerabilities can be exploited, including:

1. Token Sales: During a token sale event, attackers can use front running to purchase tokens before legitimate participants, leveraging the expected price increase.

2. Decentralized Exchanges (DEXs): DEXs are susceptible to front running, especially if traders’ transactions are publicly observable before confirmation. Attackers can exploit price discrepancies by submitting transactions that profit from traders’ pending orders.

3. Arbitrage Opportunities: Front running can also target arbitrage opportunities between different exchanges or platforms. Attackers can capitalize on price differences by executing trades before the original arbitrage trader.

🛡️ Preventing Front Running

While front running might seem like an unavoidable challenge, there are measures that Ethereum developers can take to mitigate the risks:

1. Use Oracles: Oracles provide external data to smart contracts. By using trusted oracles, developers can obtain real-world data to base their transactions on, reducing the reliance on on-chain data.

2. Private Transactions: Privacy-focused solutions, such as zk-SNARKs, can obscure transaction details until they are confirmed. This prevents attackers from monitoring and duplicating transactions.

3. Order Matching: Implement off-chain order matching mechanisms that only reveal transaction details after confirmation. This prevents front runners from exploiting visible pending orders.

4. Randomization: Incorporate an element of randomness into transaction processing. This can make it harder for front-running bots to predict transaction details.

💻 Solidity Code Snippets

To further solidify your understanding, here are some Solidity code snippets that demonstrate preventive techniques against front running:

1. Using an Oracle for Transaction Pricing:

contract FrontRunningPrevention {
 address public oracleAddress;
constructor(address _oracleAddress) {
 oracleAddress = _oracleAddress;
 }
function buyTokens(uint256 tokens) external {
 uint256 tokenPrice = getOracleTokenPrice();
 uint256 totalPrice = tokenPrice * tokens;
 // Process the transaction securely
 }
function getOracleTokenPrice() internal view returns (uint256) {
 // Connect to the trusted oracle and retrieve the token price
 // Return the price
 }
}

2. Implementing Private Transactions with zk-SNARKs:

pragma solidity ^0.8.0;
import "./Verifier.sol"; // Verifier contract for zk-SNARK proof verification
contract PrivateTransaction {
 Verifier private verifier;
constructor(address _verifierAddress) {
 verifier = Verifier(_verifierAddress);
 }
function confidentialTransfer(
 uint256[2] memory a,
 uint256[2][2] memory b,
 uint256[2] memory c,
 uint256[1] memory input
 ) external {
 require(verifier.verifyProof(a, b, c, input), "Invalid proof");
 // Process the confidential transfer securely
 }
}

Analysis Report : Front Running Vulnerability in Smart Contracts 🕵️‍♂️⚠️

Front running is a significant vulnerability in Ethereum smart contracts that allows malicious actors to exploit transaction order manipulation for their advantage. This report delves into the mechanics of front running, demonstrates a vulnerable smart contract scenario, and presents preventative techniques using unique approaches, including commit-reveal schemes and submarine sends. The analysis showcases the importance of adopting proactive measures to safeguard Ethereum contracts against this exploit.

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.17;

/*
Alice creates a guessing game.
You win 10 ether if you can find the correct string that hashes to the target
hash. Let's see how this contract is vulnerable to front running.
*/

/*
1. Alice deploys FindThisHash with 10 Ether.
2. Bob finds the correct string that will hash to the target hash. ("Ethereum")
3. Bob calls solve("Ethereum") with gas price set to 15 gwei.
4. Eve is watching the transaction pool for the answer to be submitted.
5. Eve sees Bob's answer and calls solve("Ethereum") with a higher gas price
   than Bob (100 gwei).
6. Eve's transaction was mined before Bob's transaction.
   Eve won the reward of 10 ether.

What happened?
Transactions take some time before they are mined.
Transactions not yet mined are put in the transaction pool.
Transactions with higher gas price are typically mined first.
An attacker can get the answer from the transaction pool, send a transaction
with a higher gas price so that their transaction will be included in a block
before the original.
*/

contract FindThisHash {
    bytes32 public constant hash =
        0x564ccaf7594d66b1eaaea24fe01f0585bf52ee70852af4eac0cc4b04711cd0e2;

    constructor() payable {}

    function solve(string memory solution) public {
        require(hash == keccak256(abi.encodePacked(solution)), "Incorrect answer");

        (bool sent, ) = msg.sender.call{value: 10 ether}("");
        require(sent, "Failed to send Ether");
    }
}

Front running is a well-known attack in financial markets, including the Ethereum blockchain. It involves manipulating transaction ordering to gain an unfair advantage. This report analyzes a vulnerable smart contract and explores preventative strategies to mitigate the risks associated with front running.

Front Running Mechanism

Transactions in Ethereum take time to be mined and confirmed. Malicious actors monitor the transaction pool and exploit this delay by sending transactions with higher gas prices to get their transactions confirmed before others. This manipulation leads to an unfair advantage, enabling attackers to profit from market movements caused by the original transactions.

Vulnerable Smart Contract Scenario

To illustrate the front running vulnerability, consider a vulnerable smart contract that implements a guessing game:

1. Alice deploys a contract called `FindThisHash` with 10 Ether.
2. Bob identifies the correct string that hashes to the target hash (“Ethereum”).
3. Bob submits his solution with a gas price of 15 gwei.
4. Eve observes Bob’s solution and submits her own solution with a higher gas price (100 gwei).
5. Eve’s transaction gets mined before Bob’s, allowing her to win the reward.

Preventative Techniques

1. Commit-Reveal Scheme

Commit-reveal schemes utilize cryptographic algorithms to commit to a value secretly before revealing it. This prevents front runners from exploiting visible transactions. A two-phase process is employed:

- Commit Phase: Users commit to a value by hashing it along with a secret.
- Reveal Phase: Users reveal the original value and secret, allowing verification.

A secure contract example, `SecuredFindThisHash`, is provided to demonstrate this approach:

• Users commit to a solution hash during the commit phase.
• Reveal phase ensures the solution’s integrity and calculates the hash using the same method.
• Only revealed solutions that meet the criteria are rewarded.

2. Submarine Sends

Submarine sends involve sending funds to a contract without revealing its purpose. This technique can obscure the attacker’s intent and make front running more challenging.

In Conclusion; Front running poses a serious threat to Ethereum smart contracts, undermining fairness and integrity. Preventing this exploit requires innovative solutions. Commit-reveal schemes and submarine sends offer unique strategies to mitigate the risks associated with front running. By adopting these techniques and continuously improving contract security, developers can safeguard their smart contracts and contribute to a more secure Ethereum ecosystem.

🌐 Conclusion

Front running remains a persistent threat in the Ethereum ecosystem, requiring vigilant efforts to minimize its impact. As Ethereum developers, it’s crucial to adopt preventive strategies, incorporate advanced technologies, and collaborate as a community to enhance the security of smart contracts.

Stay tuned for more intriguing topics in our #100DaysOfSolidity series! Tomorrow, we’ll unravel the intricacies of another critical concept in the realm of smart contracts.

Remember, in the world of blockchain, staying one step ahead means guarding against manipulative maneuvers like front running. 🛡️🚀

📚 Resources 📚

• 🔗 Solidity101 Link Collection
• 📝 Medium Article Source
• 📚 Web3 Library
• 📖 Amazon Book Source
• 📑 Solidity Documentation
• 💰 Donate US