How Does Setting a Low Slippage Tolerance Protect against a Sandwich Attack?
Setting a low slippage tolerance means the user's transaction will fail if the executed price deviates from the expected price by more than the set percentage. In a sandwich attack, the front-runner's initial buy order artificially pushes the price up.
If this price movement exceeds the victim's low slippage tolerance, the victim's transaction will revert. This causes the front-runner's trade to fail to execute the 'sell' leg of the sandwich, making the attack unprofitable.
Glossar
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.
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.
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.