What are sandwich attacks in crypto?

• Sandwich attacks are a form of market manipulation on decentralized exchanges (DEXs).

• These attacks exploit the transparency and immutability of blockchain technology to the attacker's advantage.

• Understanding sandwich attacks can help users protect themselves and make more informed decisions in the crypto space.

A sandwich attack is a tricky way to take advantage of a trade that a user starts on a decentralized exchange. The attacker places one order right before the user's transaction and one right after it, effectively "sandwiching" the user's transaction.

This type of market manipulation uses the main ideas of blockchain technology, like how it is open for everyone to see and how it cannot be changed, to the attacker's advantage, and it often causes problems for regular users.

In a sandwich attack, a malicious trader identifies a pending transaction on the network, for example, Ethereum. The attacker then places an order before the user's transaction (front-running) and another one right after it (back-running). The goal is to change the price of the cryptocurrency being traded, which could help the attacker.

For instance, the front-run order might drive up the price of the cryptocurrency, causing the user to pay more. The back-run order could then be used to sell the cryptocurrency, potentially causing the price to drop and leaving the user with a less valuable asset.

Sandwich attacks may have consequences for users and the broader crypto market.

For the individual user, a sandwich attack can result in financial loss as they may end up paying more for a cryptocurrency than its actual market value. On a larger scale, these attacks can make prices less stable and make people trust decentralized exchanges less.

There are several strategies users can employ to protect themselves against sandwich attacks.

One approach is to use a higher gas price for transactions, as this can make it more expensive for an attacker to front-run or back-run the user's transaction.

Another strategy is to avoid making large trades that could attract the attention of attackers.

Users may also consider using technologies or platforms that aim to obscure transaction details, making it harder for attackers to identify potential targets.