The crypto arena evolves each day, but it is becoming increasingly vulnerable to different types of hacks and attacks. These are happening more often.
The cryptocurrency platform offers many opportunities, however, fake-contract exploits are a growing concern. Many fraudsters are reaping the benefits of the mistakes in the code.
Decentralized finance is a relatively new space. It gives users tons of power without the hassles of several regulatory constraints. This is when people need to be really careful as they are prone to many types of fraudulent activities. The ‘sandwich assault’ is one such attack. At the moment, it’s not a big problem, but it can quickly turn into a major issue in decentralized finance. Traders first heard about the ‘sandwich assault’ in 2018 after Ethereum’s co-founder raised concerns about it.
What is a ‘sandwich attack’?
This assault is aimed at DeFi platforms and protocols. It can have a major impact on market manipulation. To put it plainly, the attacker will attempt to sandwich the trader’s transaction with before and after transactions. This results in a loss for the trader.
According to Raj Karkara, a Chief Marketing Officer, sandwich attacks are frequent occurrences in decentralized exchanges or DEXs.
How can you identify a sandwich attack?
This type of attack varies according to the slippage tolerance placed by the trader. The price of the token depends on the liquidity depth. For example, if a person wants to purchase 1,000 X tokens at 100 USDT per token. The slippage factor is limited to 10%. During the trade, DEX facilitates the trade, provided the price remains below 110 USDT. The attacker will check to find out the most tokens they can purchase to increase the cost. They try to make sure the price doesn’t fall past the slippage rate.
How do these attacks happen?
First, the bots look for trade transactions. These bots try to find transactions with low prices and liquid pool transactions. Most sandwich attacks are done through AMMs or automated market maker solutions. The bot identifies the transaction, then places a transaction at a higher fee.
How bad are sandwich attacks?
Since blockchains remain open, it can become difficult to do transactions. Attackers can see the type of transaction done by the victim. This hacking method may be used repeatedly without punishment.
A sandwich attack impacts the amount of cryptocurrency received by the initial user.