Cybernews investigated how much value was lost by network participants due to front running. Between April 24th and May 24th, they found that front-running resulted in losses of nearly $280 million in cryptocurrency.
That’s pretty huge. That’s nearly $12M per day and billions of value lost per year. Obscuro is an upcoming layer 2 network with network-wide privacy, which mitigates the risk of front-running.
Let’s dive into how they achieve this!
Obscuro - Layer 2 network for confidential smart contracts
Front-running and how Obscuro tackles it
In blockchains, all transactions – whether they are completed or still pending – are publicly visible.
Those with the know-how and funds to take advantage of that, will surely do so. And that is where front-running comes into play.
Miners and staker hunt for incoming transactions that are locked into a smart contract while waiting for the transaction to confirm.
For example: a swap on a DEX where a user buys coin ETH with USDT.
The front-runner can see that pending transaction -> then quickly buys ETH and sells it for a higher price to the user.
What allows him to do this, is that he sets a significantly higher gas fee than the normal user. This way his transaction gets processed faster and he is able to steal some value from the user.
Some swaps can cost users way more than they needed to or intended to pay. All due to front-running.
What are some other use cases for smart contract integrated privacy?
Some of the other interesting things that are made possible by network-wide privacy are seald acutions, private NFTs, Private agreements, dark pools, and many more.
Curious to hear your thoughts on Obscuro! Tweet us @lvrsreflections!