How Can a Trader Use a Low Slippage Setting to Mitigate a Sandwich Attack?
A trader can mitigate a sandwich attack by setting a very low slippage tolerance, typically between 0.1% and 0.5%. When a front-runner attempts a sandwich attack, their initial "buy" transaction will push the price of the asset outside the victim's maximum acceptable price range.
Because the price deviation exceeds the low slippage tolerance, the victim's original transaction will automatically fail and revert. This prevents the attacker from profiting, though the victim still pays the gas fee for the failed transaction.
Glossar
Slippage Setting
Execution ⎊ Slippage, in the context of cryptocurrency derivatives and options trading, represents the difference between the expected price of an asset and the price at which the trade is ultimately executed.
Sandwich Attack
Exploitation ⎊ The Sandwich Attack, within cryptocurrency derivatives and options trading, represents a manipulative trading strategy leveraging order book dynamics to artificially inflate or deflate an asset's price.
Low Slippage Setting
Constraint ⎊ A low slippage setting acts as a critical execution constraint, defining the maximum permissible negative price deviation a trader will accept for a transaction on a decentralized exchange.
Low Slippage
Slippage ⎊ Low slippage refers to the minimal deviation between the price expected by a trader at the time of order submission and the actual price at which the transaction executes.