What is a Sandwich Attack and How Did a Trader Lose $215,000 in One Simple Transaction?
A sandwich attack is a form of market manipulation that exploits the transparency of blockchain transactions, particularly within decentralised exchanges (DEXs). This type of attack is executed by malicious actors who manipulate the price of a digital asset to their advantage at the expense of unsuspecting traders. How Does a Sandwich Attack Work? In a sandwich attack, an attacker monitors the blockchain for pending transactions and strategically places two transactions around the victim’s trade. The process unfolds as follows: Front-Running: The attacker places a buy order for a token just before the victim’s transaction is processed, artificially inflating the token’s price. Victim’s Transaction: The victim’s trade is executed at the inflated price, meaning they receive fewer tokens than anticipated. Back-Running: The attacker then sells the tokens acquired in the front-running phase at the newly elevated price, securing a profit while the victi...