What is a Sandwich Attack? How Sandwich Attack works
Sandwich Attack is a sophisticated attack in the crypto market, exploiting transactions to make illegal profits. It is a unique and novel technique created to take advantage of the transparency of blockchain technology and MEV.
In this article, let's learn of AZcoin more about Sandwich Attack, common types of sandwich attacks, how they work, and how to prevent them.
What is a Sandwich Attack?
Sandwich Attack is a form of front-running attack, which often occurs in crypto transactions. The attacker positions himself between two transactions, typically between the user and the server nodes.
The name “Sandwich” clearly reflects how this attack works: the attacker is like a layer of fungus between two “slices of bread” which are the user and the transaction system.
How Sandwich Attack works
Sandwich Attack operates by placing orders either before or after a large-value transaction, depending on whether it is a front-running or back-running attack. The attacker uses bots to scan and select high-value transactions on the blockchain. They then place orders at higher or lower prices to create price fluctuations. If the attacker places an order before the transaction, they will buy or sell tokens at higher or lower prices than the current market price, depending on their intent. If the attacker places an order after the transaction, they will adjust the token's price to profit from the price volatility caused by the preceding orders.
Attackers may also use higher gas fees to ensure their transactions are confirmed before others. This allows them to quickly profit without having to wait long.
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Common types of Sandwich Attacks
In the crypto market, there are two common types of sandwich attacks: front-running and back-running.
Front-running
Front-running is a technique where an attacker places a buy or sell order before another large transaction. This can occur when a user places a trade order on an AMM DEX with stable liquidity. The attacker places an order beforehand and can adjust the price to their advantage. Then, while the user's transaction is pending confirmation, the attacker quickly buys or sells to profit from the price movement.
Back-running
Back-running is a technique where an attacker places a buy or sell order after another large transaction. This can happen when a user places a trade order on an AMM DEX and the token's price in the market changes due to the impact of previous orders. The attacker quickly re-balances the price and profits from this fluctuation.
The detrimental effects of Sandwich Attacks
Sandwich attacks can lead to severe consequences and negatively impact the crypto market in the following ways:
Significant losses to user asset value
When attackers execute a sandwich attack, the token price experiences substantial volatility, significantly affecting the value of user assets. This is particularly harmful in new projects with low liquidity and transaction volumes, where a sandwich attack can cause sudden price drops and large losses for investors.
Unfair price volatility
Sandwich attacks create unfair price volatility by exploiting the transparency of blockchain technology and MEV for profit. This exploitation can lead to instability and unfairness in the market.
Market imbalance and unreliability
Frequent sandwich attacks result in an unreliable and imbalanced market. Users lose trust in the liquidity and value of tokens in the crypto market, leading to decreased confidence and participation in the market.
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How to Prevent Sandwich Attacks
To prevent sandwich attacks, the following measures can be taken:
Use Flashbots protect to guard against Front-Run
Flashbots Protect is a tool developed to protect against front-run and sandwich attacks. It works by logging transactions into a "gunpowder box" and only accepting transactions placed within a specified time frame. This creates a "fixed" period for transactions, preventing front-run and sandwich attacks by introducing a delay.
Use traditional exchanges with high liquidity
To avoid sandwich attacks on AMM DEXs, users can opt for traditional exchanges with high liquidity. These exchanges typically have stronger security measures and are less prone to such attacks.
Increase knowledge and awareness of risks
Enhancing knowledge and awareness about the risks of sandwich attacks is crucial for prevention. Users should understand how sandwich attacks work and exercise caution when participating in blockchain transactions.
Utilize security tools and services
In addition to using Flashbots Protect, users can also employ other security tools and services such as cold wallets, antivirus software and virtual private networks (VPNs) to protect personal information and assets from various online attacks.
Conclusion
Above is information about Sandwich Attack and how it works. Understanding this mechanism helps you protect your assets and participate in the crypto market more safely.