Trading on decentralised exchanges feels simple until you run into sudden price jumps or unexpected slippage. Many users place a swap only to receive fewer tokens than expected or pay more than the price shown on the screen. These issues often come from hidden risks that exist in public blockchain systems.
One of the most common threats is a sandwich attack. It occurs when a dishonest trader watches your pending transaction and uses it to profit. This article explains what a sandwich attack is, how it works, why it affects everyday traders, and the steps you can take to avoid it in the future.
What Is a Sandwich Attack in Crypto?
A sandwich attack happens when a dishonest trader places a transaction before yours and another right after it. Your swap stays in the middle, which lets the attacker change the price to their advantage. You end up paying more or receiving fewer tokens.
This attack works because pending transactions on a blockchain are visible to everyone. The attacker uses this visibility to position their trades in a way that benefits them at your cost.
How Does a Sandwich Attack Happen on a Decentralised Exchange?
A sandwich attack follows a clear sequence that lets an attacker use your pending trade for profit. It starts when they spot your transaction in the public queue and quickly build two trades around it. This pushes your swap into the middle and changes your final price.
Identifying a Pending Transaction
Attackers watch the public transaction queue where every pending trade appears. They track trade size, slippage settings, and token pairs to find swaps that can be targeted for quick profit.
Front-Running the User’s Order
The attacker places a buy order with a higher fee so it goes first. This increases the token price before your trade executes, which forces you to buy at a higher value.
Back-Running to Exit at a Higher Price
Right after your trade settles, the attacker places a sell order. They exit at the top, take the profit from the price rise, and leave you with a worse rate than expected.
Why Do Sandwich Attacks Work in DeFi?
Sandwich attacks succeed because of how decentralised exchanges and public blockchains function. Every pending trade is visible, and automated market makers adjust prices based on liquidity and trade size. These conditions create an ideal setup for attackers who act fast and pay higher fees.
Public Visibility of Pending Transactions
Blockchains show every pending trade in an open queue. Attackers study this queue to see who is swapping, what they are swapping, and how much they are trading. This visibility helps them time their trades perfectly.
Slippage in Automated Market Makers
Automated market makers adjust token prices as trades occur. When a large trade enters, the price shifts, and this change helps attackers push the user into a worse rate. Slippage gives attackers enough room to earn quick profits.
Miner Preference for Higher Transaction Fees
Miners sort transactions based on fee amounts. Attackers simply pay more than the victim. Their order moves to the front and executes first, which gives them control over the sequence and the final price impact.
What Are the Different Types of Sandwich Attacks?
Sandwich attacks do not follow a single pattern. Attackers use different approaches based on whether they act as traders or liquidity providers. Each method changes how the victim’s swap behaves inside an automated market maker.
Liquidity Taker vs Taker
In this scenario, one trader targets another trader’s pending swap. The attacker places a buy order before the victim’s trade and a sell order after it. By paying a higher fee, the attacker gets priority and shapes the price path in a way that harms the victim’s output.
Liquidity Provider vs Taker
Here, the attacker acts as a liquidity provider. They remove liquidity before the victim’s trade to increase slippage. After the victim’s swap finalises at a worse rate, the attacker adds liquidity back and restores the pool. This method raises the victim’s costs and creates a chance for the attacker to benefit from the imbalance.
How Do Sandwich Attacks Affect Crypto Traders?
Sandwich attacks create real financial harm for everyday traders on decentralised exchanges. The victim always ends up with a worse price because the attacker manipulates the trade flow on both sides. This changes how much the user pays or receives during the swap.
Higher Costs for the User
The attacker’s front-running trade increases the token price before the user’s swap executes. This forces the user to buy at a higher value, which raises their total cost compared to the expected rate shown on the screen.
Lower Received Token Amounts
When the attacker sells immediately after the user’s trade, the price drops again. This reduces the number of tokens the user receives. The final output becomes smaller even though the user followed normal trading steps.
Loss of Trust in DeFi Platforms
Repeated manipulation like this discourages users from trading on decentralised exchanges. When traders feel unsafe or cheated, they hesitate to swap tokens, which slows down activity and affects confidence in DeFi ecosystems.
Are Sandwich Attacks Worth It for Attackers?
Attackers look for quick profits, but sandwich attacks do not guarantee consistent gains. The cost of placing two fast transactions can be high, and the profit margin depends on network conditions, liquidity, and the size of the victim’s trade.
Gas Fees vs Profit Margins
Attackers earn money only when the value gained from the price change is higher than the combined gas fees. On networks with high fees, the cost often rises above the possible reward, which limits the number of successful attempts.
Small but Repeated Gains
Many attackers depend on frequent, low-value trades. Each attack yields a small profit, but repeating the process across many transactions creates a steady return. This approach only works when network fees stay low.
Network Conditions and Liquidity Factors
High liquidity reduces the impact of price movement, which lowers the attacker’s profit. Price volatility also affects timing. Attackers target volatile token pairs because they can shift prices with smaller trades.
How Can You Protect Yourself From a Sandwich Attack?
You can reduce the risk of a sandwich attack by adjusting how you trade on decentralised exchanges. These attacks rely on visibility, timing, and slippage, so simple changes to your trading approach make you a harder target.
Using Higher Gas Fees for Quick Execution
Paying a slightly higher gas fee helps your transaction move ahead of attackers. Faster execution reduces the time your trade stays in the public queue, which lowers the attacker’s chance to place trades around it.
Reducing Trade Size to Avoid Attention
Attackers look for large trades because they create bigger price shifts. Smaller swaps attract less interest and leave less room for attackers to profit. Splitting a large swap into smaller parts can make a major difference.
Using Private or Shielded Transactions
Some platforms offer private routing that hides your trade from the public queue. These transactions appear only after they are confirmed, which prevents attackers from seeing them early and planning a sandwich.
Selecting Platforms with Anti-Front-Running Tools
Certain decentralised exchanges use tools that block or reduce sandwich attempts. These features improve how trades are grouped and processed, which prevents attackers from using fee-based priority to manipulate prices.
Conclusion
Sandwich attacks take advantage of how decentralised exchanges work and how traders interact with them. These attacks occur when a dishonest trader surrounds a user’s swap with two quick trades to alter prices and take profit. Simple steps such as using private routing, reducing trade size, and increasing gas fees can lower your risk and keep your swaps safer.
A clear record of your trades helps you track your activity and understand your costs. KoinX automates this process by organising your transactions across wallets and exchanges, making tax reports simple and accurate. Join KoinX today and keep your crypto activity easy to manage.
Frequently Asked Questions
How Can I Tell If A Sandwich Attack Targeted Me?
You may notice unexpected slippage, higher costs, or fewer tokens than the rate shown before your trade. Checking the transaction sequence on a block explorer can help. If you see two trades from the same wallet placed immediately before and after yours, it likely signals a sandwich attack.
Do Sandwich Attacks Require Advanced Technical Skills?
Yes. Such attacks require speed, monitoring tools, and an understanding of how automated market makers behave. Attackers must also manage fees and timing to stay ahead of the user’s trade. While tools make this easier, attackers still need knowledge of how trades move through the blockchain queue.
Are Sandwich Attacks Legal?
Most regions lack specific laws addressing sandwich attacks in decentralised finance. These attacks mimic behaviour seen in traditional markets, where similar practices are restricted. As regulations evolve, authorities may introduce more explicit rules that classify these actions as market manipulation.
Do Private Transactions Stop Sandwich Attacks Completely?
Private or shielded transactions reduce risk because attackers cannot see pending trades in advance. However, this does not guarantee full protection. Users still need to consider network conditions, gas fees, and slippage settings. Combining private routing with careful trade planning offers the best defence.
Why Do Large Trades Attract More Sandwich Attacks?
Large trades shift prices more noticeably, which creates bigger profit margins for attackers. These shifts make it easier for attackers to front-run and back-run effectively. Smaller trades do not offer the same opportunity, which is why attackers often target swaps with high value or high slippage tolerance.
