Securing Your Moves: Outsmarting Front-Runners in Their Own Game

Whether you identify as a developer or a user within the web3 realm, the concept of ‘front-running’ has likely crossed your path or perhaps even affected your experiences. In this article, I will be sharing valuable insights to safeguard yourself against front-runners.

Photo by GuerrillaBuzz on Unsplash

What is Front-running?

Front-running is a bit like someone eavesdropping on your plans and then trying to beat you to the punch. Imagine you’re in a line at a store waiting to buy a limited-edition toy that’s about to go on sale. The person in front of you hears you talking about wanting that toy and quickly rushes to buy it before you get the chance. They’re trying to scoop it up before you can, even though you were there first.

In the world of online money and cryptocurrencies, front-running is a similar idea. Let’s say you want to buy some digital coins at a certain price. Before your purchase goes through, someone with more advanced tools or faster computers notices your plan. They quickly buy those coins at the lower price and then immediately sell them to you at a slightly higher price. They’re making a profit by getting in front of your transaction.

Front-running can happen in various online situations where there’s a delay between when you decide to do something and when it’s actually done. It’s like someone sneaking in front of you in line to take advantage of your plans and make a profit for themselves.

In more Technical Terms….

Front-running involves exploiting the order execution process by taking advantage of the predictable sequence of transactions being processed in a block. Here’s how it works:

1. Transaction Visibility: When a transaction is broadcasted to the network, it becomes visible to all participants. This includes miners who are responsible for confirming transactions and adding them to the blockchain.
2. Gas Price Auction: Users attach a gas price to their transactions as an incentive for miners to prioritize their transactions. Transactions with higher gas prices are more likely to be included in the next block.
3. Front-running Attack: A front-runner observes pending transactions and identifies profitable opportunities. For instance, if someone places a large order to buy a specific token at a certain price, the front-runner quickly submits a transaction to buy the same token at a slightly higher price before the original transaction gets confirmed.
4. Arbitrage Profit: The front-runner’s transaction gets mined ahead of the original transaction due to the higher gas price. Once the front-runner’s transaction is confirmed, they can immediately sell the acquired tokens to the original user at a slightly higher price, making a profit in the process.
5. Privacy and Security Concerns: Front-running not only leads to financial losses for the user being front-run but also raises privacy concerns, as the attacker gains insight into users’ intentions and transactions.

Front-running can be facilitated through bots and automated scripts that continuously monitor the transaction pool for profitable opportunities. This practice takes advantage of the open and transparent nature of blockchain transactions, as well as the inherent delay in transaction confirmation.

For a view of the transactions in the mempool, you can navigate to: https://txstreet.com/

Alternatively, you can use the provided script below to track pending transactions associated with a specific contract.

require("dotenv").config()

var Web3 = require('web3');
var fs = require('fs')

var options = {
    timeout: 60000,
    clientConfig: {
        // keepalive: true,
        // keepaliveInterval: 6000,
        maxReceivedFrameSize: 100000000,
        maxReceivedMessageSize: 100000000,
    },
    reconnect: {
    auto: true,
    delay: 5000,
    maxAttempts: 15,
    onTimeout: false,
    },
};
// You can use any websocket provider such as infura, alchemy etc.
// It will look like: 'wss://mainnet.infura.io/ws/v3/<API_KEY>'
var web3 = new Web3(new Web3.providers.WebsocketProvider(process.env.WEBSOCKET_PROVIDER, options));


// Get pending transactions from ethereum network (mempool)
const getPendingTransactions = web3.eth.subscribe("pendingTransactions", (err, res) => {
    if (err) console.error(err);
})

var main = function() {
    getPendingTransactions.on("data", (txHash) => {
        setTimeout(async () => {
            try {
                let tx = await web3.eth.getTransaction(txHash);
                if (tx != null)

                // Get Transaction from a certain address and write it down in a file
                if (tx.to == 0xdAC17F958D2ee523a2206206994597C13D831ec7)

                var writeTxFromTether = async function(data) {
                    fs.appendFile("./Transactions.txt", JSON.stringify(data) + '\n', (err) => {
                        if (err) console.log(err);
                        console.log("Updated Successfully");
                    })
                }
                console.log({tx});
            } catch (err) {
                console.error(err);
            }
        })
    })
}

main()


/// Get transaction details from transaction receipt
async function getReceipt(hash) {
    var receipt = web3.eth.getTransactionReceipt(hash)
    console.log({rec:await receipt});
}

// getReceipt("0xdb4dd756220ad7677e2238d6cec303d19e93de1671cdd1828a94458a5235b1a6")
// .then(() => process.exit(0))
// .catch((error) => {
//     console.error(error);
//     process.exit(1)
// })

Strategies to Prevent Front-Running

Now, there are ways to stop this kind of loss from happening. We can take steps to make sure that others can’t take advantage of our transactions and cause us harm.

Gas Price Awareness

Front runners are delighted to see slow transactions because it gives them more time to devise an order for riding your trade and making profits. Underpaying on gas makes your transactions queue up for longer, providing front runners more time to formulate their strategy and damage your interests.

Overpaying on gas motivates miners to validate your transaction faster, minimising your odds of becoming the target of a bad actor. For this purpose, you might set the gas price to higher than average or simply use the fast gas option on your wallet.

Use large liquidity pools

Front runners are fond of low liquidity pools, as there is less chance of competition as well as disruption of their transaction by a large order that unexpectedly alters the pool weighting. Executing your trades in large liquidity pools makes it less likely to get hit by front-running.

Keep maximum slippage low

You can set the slippage (maximum deviation from the expected return) tolerance in most decentralised exchanges. An example will help you understand the scenario better.

Suppose you place an order on a DEX and expect a return of 500 Tether for it. If you set your slippage to 1% of your order, then you won’t be receiving less than 495 USDT. However, if higher slippage tolerance is greater, there will be more deviation.

So, try to keep maximum slippage low, around 0.5%-2%, to fend off front runners. If you are going to place a large order, keep your slippage at the lower keel. Front runners want you to keep slippage high, so better to do just the opposite of it.

Use Layer2 Solutions:

Layer 2 scaling solutions, such as Optimistic Rollups and zk-Rollups, can significantly reduce the risk of front-running while offering faster and cheaper transactions.

With these side chains, the ordering takes place off-chain while the settlement does on the main chain. With these two steps taking place on different platforms, this not only has benefits for increased throughput but will deter miners or regular users from obtaining the information necessary to exploit the front-running vulnerability.

Smart Contract Design:

Developers can employ various techniques within smart contract design to mitigate the impact of front-running. These include using commit-reveal schemes, secret auctions, and other mechanisms that make it harder for front-runners to predict outcomes.

By staying informed, employing smart tactics, and utilising the tools available, you can reduce the risk of falling victim to front-running and help maintain the integrity of decentralised platforms.

Use Flashbots or MEV Protection Tools:

Flashbots is a platform that aims to minimise the impact of front-running by offering a secure way for users to submit transactions directly to miners. Integrating MEV (Miner Extractable Value) protection tools can also help you avoid exploitative activities.

Use Aggregators

When you are making large transaction such as swap, you should always use Aggregators as they divide a big transaction to multiple small transactions, this helps in preventing front-running (as malicious users are less interested in small transaction), as well gives the maximum return from a swap.

Conclusion

Front-running attacks pose a significant threat to the security and fairness of Solidity smart contracts. By understanding the nature of these attacks and implementing appropriate preventive measures, developers can mitigate the risks and enhance the integrity of decentralised applications.

Strategies such as Gas Fee Awareness, use large liquidity pools, keep maximum slippage low, Using layer 2, Smart Contract design and use of Flashboat. Moreover, regular auditing and adherence to security best practices are crucial in ensuring the robustness of Solidity smart contracts.