Why Do Front-Runners Specifically Target Transactions with High Slippage Tolerance?
Front-runners target transactions with high slippage tolerance because it provides them with a larger window of profit. A high tolerance signals that the original trader is willing to accept a significant price deviation.
This allows the front-runner to execute a sandwich attack ⎊ buying before and selling after the victim's trade ⎊ which maximizes the price impact and, consequently, the front-runner's profit. A low tolerance makes the attack unprofitable as the victim's trade would revert.
Glossar
High Slippage
Execution ⎊ The phenomenon of high slippage arises when the price at which a trade is executed differs significantly from the initially quoted price.
High Slippage Tolerance
Tolerance ⎊ High slippage tolerance, within cryptocurrency and derivatives markets, signifies an investor’s or trading system’s capacity to accept price discrepancies between order execution and the anticipated price.
Target
Precision ⎊ A target, within cryptocurrency derivatives and financial markets, denotes a predetermined price level or state serving as a focal point for trading strategies and risk management protocols.
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.