ETH Frontrunning Protection 101 for Mobile Wallet Users

By Shen Chen, bloXroute Business Development Lead

If you are a mobile wallet user interested in DeFi trading, you might have heard of frontrunning. Without taking adequate precautions, your finances remain at risk from frontrunners. In this article, you will learn how to avoid becoming a victim of frontrunning with the help of bloXroute Labs’ Frontrunning Protection.

Why should mobile wallet users be concerned about frontrunning?

Frontrunning is the practice of purchasing a stock or other financial asset based on advanced, non-public information regarding a future transaction that will significantly affect its price. It is considered illegal and unethical in the traditional financial markets. However, unlike traditional markets (that are regulated), decentralized exchanges (DEXs) resemble the Wild West — especially when it comes to frontrunning. Unlike stock exchanges where frontrunning is often based on private information, DEXs have become a popular target of frontrunners for a variety of other reasons e.g., transaction confirmation latency (e.g. slippage) and lack of transaction information privacy — which have created large infrastructure vulnerabilities for frontrunners to exploit.

When swapping tokens on Uniswap, a transaction is generated and sent to public mempools where it waits for miners to add it to the block. While the transaction is waiting in the mempool, it is at risk of being frontrun. Frontrunners use algorithms called “arbitrage bots” to identify pending transactions in the mempool that can be frontrun for profit. If one of your transactions is targeted by a bot, it will insert the same transaction in front of yours by paying a higher gas fee and using a faster network connection. If the bot’s transaction is confirmed before yours, you could end up missing out on the arbitrage opportunity. Due to its popularity, Ethereum has been the primary target of frontrunning attacks. People trading on Ethereum-based DEXs and DeFi protocols have, therefore, suffered the greatest losses.

Professional traders tend to be more aware of frontrunning than retail traders using mobile wallets. This is because professionals’ trading volume and frequency are much higher, meaning they have more to lose from frontrunning attacks. That said, bots don’t distinguish between retail traders and professional traders. When the network is congested, less experienced traders (i.e., retail traders) tend to lose more from frontrunning because the prolonged transaction confirmation process not only gives the bots more time to enact their mischief but also makes it harder to reduce the slippage after the attack. Because professional traders often find ways to avoid the bots, less experienced retail traders become even more likely victims of frontrunning attacks.

How can mobile wallet users prevent frontrunning attacks?

Since a transaction’s confirmation latency and transaction transparency are the pre-conditions for frontrunning, addressing these factors is critical in combating frontrunning.

How should one evaluate the effectiveness of a frontrunning protection solution? An effective solution should achieve two things:

• Denying arbitrage bots access to pending transaction information: To prevent bots from seeing pending transactions, there must be an “invisible” mempool separate from the public mempool that is detectable by the bots.
• Reducing confirmation delays caused by network congestion: To guarantee the transaction execution speed, the solution must involve both transaction propagation and transaction confirmation; the former requires a fast relay network that is unlikely to be interfered with by native peer-to-peer (P2P) network congestion, while the latter requires a sufficient amount of supporting hash power.

While continuing to improve the network layer efficiency for ETH miners, bloXroute Labs introduced the industry’s first comprehensive Frontrunning Protection solution in October 2020. This solution has proven effective in addressing both transaction confirmation latency and privacy issues, and has been adopted by many ETH DeFi projects and professional traders.

Thanks to its partnership with ONTO Wallet developed by Ontology team, bloXroute now provides mobile wallet users easy access to the same frontrunning protection service as that enjoyed by professional traders.

How to use ONTO Wallet for ETH frontrunning protection?

ONTO Wallet is the pioneer of Decentralized Identifier (DID) technology. Adding a frontrunning protection feature is another step towards greater protection of user sovereignty. To get started, check out ONTO’s frontrunning protection user guide: https://ontology-1.gitbook.io/onto/guides/assets/private-transactions-on-ethereum.

About bloXroute Labs

bloXroute Labs is the leading blockchain network layer (aka “layer-0”) solution provider specialized in on-chain scalability and DeFi trading network infrastructure. In 2019, bloXroute launched the industry’s first layer-0 scalability solution — Blockchain Distribution Network (BDN), which has been adopted by the majority of Ethereum miners. It helps miners reduce uncle rate by accelerating on-chain block and transaction propagation. The BDN is also compatible with all blockchain protocols. In 2020, bloXroute introduced the ETH DeFi toolkit that includes a transaction propagation accelerator, advanced mempool service, and frontrunning protection. It helps traders improve their trading strategies and increase earnings.

bloXroute is based in Chicago and their investors include Pantera Capital, Coinbase Venture, and Fenbushi Capital.

About ONTO Wallet

ONTO is the first truly decentralized cross-chain wallet that allows users to manage their digital identities, data, and digital assets. It integrates various functions such as identity and credit, digital assets and NFTs, financial lending, cross-chain swaps, news push, and various practical dApps, as well as supporting multiple mainstream public chains and their diversified digital assets.

ONTO helps users create a decentralized digital identity. Built on the Ontology blockchain, ONTO fully protects users’ privacy data through an encryption algorithm. Aiming to provide a safe and convenient all-in-one service for users worldwide, ONTO Wallet is designed for both mobile and desktop.

Download ONTO via onto.app or search “ONTO Web” on the Chrome Web Store.