What Is the Difference between an Arbitrage Bot and a Front-Running Bot?
An arbitrage bot exploits legitimate price discrepancies between different markets or liquidity pools to profit, which helps to maintain market efficiency. A front-running bot exploits knowledge of a pending transaction to place an order ahead of it, causing the original user to execute at a worse price for the attacker's gain.
The key difference is the intent: arbitrage corrects market inefficiency, while front-running exploits an individual user's transaction for predatory profit.
Glossar
Arbitrage Bot Exploits
Latency ⎊ Sub-millisecond advantages in network propagation or order processing grant arbitrage bots the capacity to capture ephemeral price discrepancies across disparate venues.
Front-Running Bot
Bot ⎊ A front-running bot is an automated trading program designed to monitor the public transaction pool, or mempool, for pending orders that will predictably impact the price of an asset, particularly in decentralized exchange liquidity pools.