Define the Term “Priority Fee” in the Context of Transaction Ordering.
A priority fee, or "tip," is an extra amount of cryptocurrency voluntarily included by a user in their transaction to incentivize the block producer (miner or validator) to prioritize its inclusion in the next block. It is a direct payment to the block producer, separate from the base network fee.
Front-running bots use a high priority fee to ensure their arbitrage transaction is ordered ahead of the target transaction in the same block.
Glossar
Arbitrage Transaction
Mechanism ⎊ An arbitrage transaction, within cryptocurrency, options, and derivatives, exploits transient price discrepancies for the same asset across different markets or forms.
Priority Fee
Incentive ⎊ The priority fee, often referred to as a tip, is an optional payment included in a transaction to incentivize validators to prioritize its inclusion in the next block.