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Front-Running

  • Writer: Lara Hanyaloglu
    Lara Hanyaloglu
  • Feb 14
  • 2 min read

Front-running is a type of market manipulation where traders or bots place orders ahead of large transactions to profit from expected price changes. In cryptocurrency markets, front-running is common on decentralized exchanges (DEXs)like Uniswap and PancakeSwap, where transactions are public on the blockchain.


🧩 How Does Front-Running Work?

Front-running exploits the delay between when a trade is submitted to the blockchain and when it is confirmed.

Example:

  • You place an order to buy a new token at $10.

  • A front-running bot detects your transaction and immediately places a buy order with a higher gas fee, getting ahead of you.

  • The bot's trade is confirmed first, causing the token’s price to rise to $11.

  • Your order goes through at the higher price, and the bot quickly sells its tokens for a profit.

This is possible because blockchain transactions are visible to everyone before they are confirmed.


🚀 Why Do People Front-Run?

  • Quick Profits: Gain from price differences created by large orders.

  • Exploiting Public Information: Blockchain transactions are public, making detection easy for bots.

  • High-Frequency Trading: Automated bots act in milliseconds to capture small but frequent profits.


⚠️ Risks and Impact of Front-Running:

  • Increased Slippage: Buyers pay more than expected due to sudden price jumps.

  • Unfair Market: Retail traders lose out to automated bots.

  • Loss of Trust: DEXs can become unattractive to traders if front-running is rampant.


🛡️ How to Protect Yourself from Front-Running:

  • Use Private Transactions: Some DEXs offer private order routing to hide your transaction until it is confirmed.

  • Adjust Slippage Tolerance: Lowering slippage settings reduces the chance of paying more than intended.

  • Trade on Layer 2 Networks: Platforms like Arbitrum or Optimism have faster and cheaper transactions, making front-running less profitable.

  • Use Anti-Front-Running DEXs: Platforms like CowSwap and Balancer have built-in protection mechanisms.


In a Nutshell:

  • Front-running is a predatory trading tactic that profits from faster transaction execution.

  • Bots are the main players, using high gas fees to jump the queue.

  • Protection methods include private transactions, lower slippage, and using front-running-resistant DEXs.

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