A sandwich attack is a type of market manipulation where an attacker places two orders around a victim’s transaction. In decentralized finance (DeFi), particularly on automated market maker (AMM) platforms, an attacker observes a pending transaction and then places a buy order just before it and a sell order just after it. This maneuver exploits the price impact of the victim’s transaction, allowing the attacker to profit from the temporary price movement. Such attacks are a form of front-running and contribute to the broader category of maximum extractable value (MEV).
Context
The state of sandwich attacks is a significant concern in DeFi, impacting user experience and market fairness, especially on networks with transparent mempools. Key discussions revolve around developing and implementing MEV-mitigation strategies, such as encrypted transaction pools or more sophisticated order matching algorithms. Future developments aim to reduce the profitability and prevalence of these attacks, improving the integrity and fairness of decentralized trading environments for all participants.
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