What is a crypto sandwich attack?

A crypto sandwich attack is a common DeFi or, rather, liquidity pool occurrence where attackers exploit market and liquidity imbalances to execute profitable trades at the expense of victims or vulnerable traders. The attacker front-runs the victim’s trade, hikes the prices, and makes the victim buy at a higher price. The attacker eventually sells the assets, making use of the higher price, which was pushed even higher by the victim’s buy order.

How does a sandwich attack work?

Sandwich attacks work when attackers use a combination of multiple transactions or trades, high-speed trading algos, and high-speed bots to locate high-value orders and front-run the same. The victim’s transaction is sandwiched between two or more attacker transactions, resulting in loss and eventual profit for the attacker.

How do you stop sandwich bots?

In a true sense, it is quite difficult to stop sandwich bots from running and executing trades completely. However, order splitting and using tools like slippage protection can help. Also, as a trader, you can prevent sandwich attacks by avoiding high-value trades during peak hours and using public Wi-Fi for making trades.

What are the needed conditions for an attacker to launch the sandwich attack successfully?

There are quite a few conditions for a successful or rather profitable sandwich attack to happen. The mempool should have a high-value pending transaction that might change the balance of the liquidity pool, the attacker must be on a low latency network with the right set of bots, and they must have the technical expertise to front-run and back-run trades at warped speeds.