Front-Running Mechanics

Front-running mechanics involve the strategic placement of a trade with the knowledge of a pending transaction, with the intent to profit from the price impact of that transaction. In decentralized finance, this is often achieved by monitoring the mempool for large pending orders and submitting a transaction with a higher gas fee to be processed first.

The front-runner buys the asset, the victim's order is processed, and the price rises, allowing the front-runner to sell for a profit. This is a contentious aspect of market microstructure that highlights the adversarial nature of transparent, public blockchains.

Many protocols are now implementing features like batch auctions or commit-reveal schemes to prevent this behavior.