How Can a Protocol Use Slippage Tolerance Settings to Prevent Front-Running Attacks?
Users set a slippage tolerance (e.g. 0.5%) for their trade.
If the final executed price is worse than the initial price by more than this tolerance, the transaction is automatically reverted. Front-running bots attempt to insert a transaction before the user's to profit from the price change.
By setting a low tolerance, the user ensures that the front-runner's transaction will cause their own to revert, making the attack unprofitable.
Glossar
Low Slippage Tolerance
Execution ⎊ Low slippage tolerance within cryptocurrency, options, and derivatives trading signifies a prioritization of order fulfillment at or near the anticipated price.
Slippage Tolerance Settings
Slippage ⎊ Within cryptocurrency derivatives and options trading, slippage represents the difference between the expected price of an order and the price at which it is ultimately executed.
Slippage Tolerance
Mechanism ⎊ Slippage tolerance, within cryptocurrency, options, and derivatives trading, defines the maximum acceptable difference between the expected price of a trade and the price at which the trade is actually executed.