The Best Crypto Wallets: Use Zero Knowledge Proof to Prevent Front Running Bots from cheating you

Everytime you place a significant order on a blockchain, a Front Running bot could be scanning details of your transaction/orders; sandwiching your orders with a buy/sell or sell/buy of its own, resulting in you paying a higher price or earning less, whilst the front running bot makes more money at your expense.  Protect yourself with low slippage, smaller size transactions and Zero knowledge encryptions solutions like BlockWallet.

What are Front Running Bot?

Front Running Bots are bots that do zillions of insiders trading on blockchain. They place orders or transactions in front of yours (running in front of yours) to beat you to expected price changes that is most likely a result of executing your order or transactions, and by so doing make money off the market mostly at your expense. Front running bots are bots that place market orders/transactions in front of market impacting orders that are waiting in a line to be executed.

Front running bots are designed to run like insiders trading, they use privilege details information of your transaction to cheat the market. So front running bots are automated insider traders/cheats using privilege information to trade on blockchains and cryptocurrency.

Generally, transactions orders should line-up to be served in a first-come-first-serve basis; Front Running Bots are line jumpers/shunters they squeeze in-between the line in front of a market impacting order/transaction, they get executed first, and take a position before the market moving order, once the market moving order is executed they take advantage of this price movement and make a profit.

Further explanation with a hypothetical example

Mr.A places an order to buy 1m stones; a front running bot can see the details of his order while waiting to be executed and place an order to buy say 500k stones, in front of Mr.A order.

1.       The bots order gets executed first before Mr.A orders say at $100/stone.

2.       The Bots order may in itself raise the price.

3.       Mr. A order gets executed for $110 because the order is big and further impacts the market.

4.       The Bot sells his stones immediately Mr.A  order is being executed at $110, Mr.A pays $110

5.       The front running bot makes a spread of $10 at Mr.As expense.

6.       If the Bot had not squeezed or run in front of Mr.A order the price may still move but may be to $106.

7.       And so because of the Front Running Bot Mr.A is paying more for the stones and losing money.

8.       Regardless the front running bot is doing this transaction because it has information about Mr.As pending order.

9.       Front Running Bot another name for insiders trading on blockchain.

But How does the Front Running Bot get insiders information?

Remember blockchain is transparent and you are not anonymous; Also it’s a bot! It can execute lightning speed scans, order placement etc. From more powerful computers so it has a speed advantage, you place your orders generally from slower computers and these Bot just overtake you and also

1.       Don’t forget Blockchain is transparent and you are not anonymous

2.       Because orders are getting more and so they are waiting more and more in line to get executed by miners.

3.       While they wait they are exposed to Front Running Bots who scan them see the details of the order.

4.       And can use those details to identify market impacting orders and nd place an order of their own.

 Why are they allowed to jump the line/how are they able to jump the line?

Miners! Yes miners allow it because of something called Miners Extractable Value (MEV) another word for tip, if you tip me I will serve you first, so

1.       The Front Running Bots tip the miners to process their orders before yours by increasing the gas fees they pay.

2.       The miner wanting to earn more takes the higher gas fees and process the Front running bots order.

3.       The Miners actions aid the bots to jump the line to your front.

What can I do to protect my Transactions and disincentives Front-Running Bots?

1.       Get a wallet that uses Zero-knowledge Proof like BlockWallet. Zero-Knowledge allows you to execute transactions without revealing details of the transaction; with the bot unable to see your transaction details it is unable to cheat you.

2.       Split your transactions into smaller value, this makes it less valuable/interesting for the bots to front run your transactions.

3.       Insert very low-slippage on your transactions making it more difficult for the bot to squeeze in and sandwich your big orders and also reduce the margin by which any bot can possibly increase your cost.

Conclusion

The thing about Crypto is that once something goes wrong, you can lose everything and never be able to reclaim it again, and so you really want to be careful and make some of the better choices to ensure your safety, privacy and unanimity in the crypto space, so you should always choose carefully.

CAVEAT:

1.       Note- This is not a financial investment advice.

2.       All financial investments  involve risk DYOR (Do your own research) before making any financial investments

3.       This article are my thoughts and opinion about the subject matter.

References

1.       Anderson, W.P. Front-running, flash bots and keeping things fair in the crypto market. (2022,02,26) https://cointelegraph.com/news/front-running-flash-bots-and-keeping-things-fair-in-the-crypto-market

2.       What is front-running in crypto and NFT trading? https://www.bitcoininsider.org/article/156321/what-front-running-crypto-and-nft-trading

3.       Orieon. Art of Speculation. Front Running Bots in Crypto EXPLAINED! https://www.youtube.com/watch?v=K7mfciHAcLc

4.       Daniels, C.K.  The Front-Running Crypto Bot SCAM - Avoid The PancakeSwap Front Run / Sniper Bot. (2022,01,22). https://www.youtube.com/watch?v=vtIo_zozexg

5.       Naz. How to Front-run in Ethereum. (2020.02.17). https://nazariyv.medium.com/crypto-front-running-for-dummies-bed2d4682db0