Frontrunning protection in DeFi: The power of private mempools and Flashbots

Frontrunning protection in DeFi: The power of private mempools and Flashbots

It is easy for Ethereum and other smart contract network users to be overcome with excitement for the opportunities the technology provides that they are not aware how risky trading on-chain can be. OMNIA, a blockchain infrastructure provider to protect systems, has explored the risk of frontrunning. 

Frontrunning, an illegal and unethical practice in traditional financial markets, is rampant in the open blockchain world. Frontrunners have made an estimated $600m by taking advantage of decentralized exchanges (DEXs) on networks such as Ethereum. They exploit the time it takes for transactions to be confirmed on-chain and the public nature of open-source blockchains. Frontrunner bots scan the blockchain for transactions they can extract value from, such as trades that will move the price of an asset, or arbitrage opportunities.

Open-source blockchains enable frontrunning attackers due to their economic incentives for miners and the open nature of all transactions on-chain. To combat this, the Omnia Protocol addresses the key information these bots use in a bid to stop them from being able to figure out which transactions they can exploit. Omnia boosts users’ privacy by leveraging private mempools, which are private endpoints between users and miners. These mempools are a paid service as they stop arbitrage bots from getting in and understanding which transactions they may exploit. Holding $OMNIA offers users numerous benefits, including access to these pools.

In addition, through a collaboration with Flashbots, a research and development organization working on mitigating the native externalities of miner extractable value (MEV), the Omnia Protocol deploys protections against multiple types of frontrunning. Flashbots work on creating a permissionless, transparent, and fair ecosystem for MEV extraction to preserve the ideals of decentralized blockchains like Ethereum. The adoption of a neutral, public, open-source infrastructure for MEV extraction could change the game, making frontrunning a thing of the past and improving transaction efficiency.

For more information, read the original article here.

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