This is called a front-running attack.Īs decentralized finance (DeFi) becomes more common, this ability can make a user a significant profit. An attacker has the ability to ensure that their transaction is processed before any other transaction by including a higher transaction fee with it. Taking Advantage of the Processįront-running attacks take advantage of this process of adding transactions to blocks based on transaction fees. The block creator – who receives these fees and is trying to maximize their profits – will add transactions to blocks based on fees, not the order in which they are received. This means that a user can pay for priority, putting a higher fee on a particular transaction.
While blockchains often have a minimum fee, blockchain users can set their own fees. The order in which transactions are added to blocks is typically determined based upon the transaction fees. When a new block is being built, the block creator draws from the current pool of unused transactions. When nodes receive a copy of a transaction, they add it to a pool of unused transactions. Once a blockchain user has created a transaction, they broadcast that transaction to the entire blockchain network. Since the block creation process is decentralized, this means that the entire blockchain network needs to know about these transactions.
The nodes in the blockchain network need to know about a transaction before it can be added to a block. They are collected into blocks and only added to the ledger as a part of these blocks. Transactions are not added immediately to the blockchain’s distributed ledger. How Transactions Are Added to the Blockchain A user that takes advantage of how the system works can make a near-guaranteed profit trading DeFi.
Front-running attacks take advantage of the process by which transactions are added to the blockchain’s distributed ledger.
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