Front-running means trading ahead of a known upcoming transaction to benefit from its expected effect. In traditional markets, the term commonly concerns misuse of confidential customer-order information. In blockchain trading, it can also involve transactions visible in a public mempool before execution.
Why transaction order matters
A pending purchase may change a liquidity pool’s price. Another participant who obtains earlier execution can trade before that change. In a sandwich attack, this is combined with a later transaction around the victim’s trade, potentially worsening the victim’s execution price.
Block producers and other participants involved in transaction ordering influence which transaction executes first. Paying a higher fee does not universally guarantee priority. Front-running is one possible source of maximal extractable value, or MEV; MEV also includes activities such as arbitrage and liquidation, so the terms are not interchangeable.
Limits and protections
Private transaction submission can reduce exposure in the public mempool, but its effectiveness depends on the service and its trust assumptions. Tight slippage limits can constrain an unfavorable fill while increasing the chance of transaction failure.
Legal treatment depends on the conduct and jurisdiction. FINRA’s front-running rule addresses specified securities-market conduct; it should not be presented as a universal rule for every blockchain transaction.