Front Running Meaning

Front running is a trading practice where an actor enters a trade based on advance knowledge of a pending transaction that will move the price of an asset. In decentralized environments, this is a byproduct of the "mempool"-the public waiting area where transactions sit before they are included in a block. By seeing a large "buy" order in the mempool, a front-runner can submit their own order with a higher fee to be processed first, profiting from the resulting price increase.This activity is a primary driver of Maximal Extractable Value (MEV).

Sophisticated bots constantly scan for "buy" orders on decentralized exchanges. When a lucrative trade is spotted, the bot "jumps the line" by paying more to the validator.

The bot buys the asset, the original user’s trade executes at a worse price (higher slippage), and the bot immediately sells the asset back to the market, pocketing the difference. This effectively "taxes" the original user.Front running can take several forms, the most common being the "sandwich attack." In this scenario, the attacker places one order before the victim's trade and one order after it, "sandwiching" the victim's transaction to extract the maximum amount of slippage profit.

While technically legal in most permissionless systems, it creates a poor user experience and can lead to significant slippage for large institutional or retail trades.To combat front running, the industry has developed "private RPC" channels. These tools allow users to bypass the public mempool and send their transactions directly to validators.

If a transaction is private, front-running bots cannot see it until it is already finalized in a block, making it impossible to jump ahead of the trade. This has become the standard for professional traders and those moving large amounts of capital.Ultimately, front running is a symptom of the "ordering power" held by those who build and validate blocks.

As protocols move toward "Threshold Encryption" and "Fair Sequencing," the goal is to make the mempool opaque or the ordering process random. By removing the visibility or the ability to reorder transactions, the profit motive for front running is eliminated, leading to a more equitable and efficient market.