Research Summary: Analyzing and Preventing Sandwich Attacks in Ethereum

Sandwich Attacks: Ethics and Impact
Bob and Chad are friends who understand how well smart contracts in Ethereum work. One day, they get into an argument about sandwich attacks based on a recent news they heard. Chad argues that sandwich attacks are fun and ethical, but Bob feels otherwise. Bob believes it is a manipulation, hence unethical.

Not everyone believes that sandwich attacks on DeFi are unethical. Some people are like Chad. They see it as a case of survival of the fittest and that in war, everything is fair. The title of this paper, Attacking the DeFi Ecosystem with Flash Loans for Fun and Profit, gives a sneak peek of how a good number of users feel about DeFi attacks.

In this post, I will give reasons why I believe that sandwich attacks are unethical and impact the DeFi ecosystem negatively.

Understanding Ethics and Sandwich Attacks
Ethics bothers on the moral principle of what is right or wrong. Ethical behavior boils down to a morally good behavior, whereas unethical behavior is referred to as a morally unacceptable behavior.

Image source: My Own Business Institute

On the other hand, in a sandwich attack, one user, who is perhaps smarter and more DeFi savvy, frontruns and backruns another user’s transaction.The consequence of this is that the second user loses a percentage of their funds. But the first user makes a reasonable profit from the transaction.

Probably nothing is inherently wrong or right, it has to be established. I will establish some points in the following paragraphs.

The Process of Sandwich Attacks
In a sandwich attack, there is a victim and an attacker. One is the conquered and the other is a conqueror. The problem with being conquered is that it leaves one unhappy and regretful. Is it right to make someone else feel this way?

Also, the most outstanding thing about the attacker is their intent. An attacker sees a large pending order from a victim and decides to frontrun and backrun it for profit. The intent of the attacker is to make profit from the prospective victim’s fund while the victim loses part of their fund. In the end, they technically steal the victim’s funds. Taking what does not belong to someone is wrong. But again, what is wrong or right has to be established, and a good number of people will agree that stealing is wrong.

Some see sandwich attacks as fun because they are at the winning end. What if they are the victim? Would it still be fun to lose their fund? Does anyone like to lose their funds? If losing one’s fund will make one feel bad, then it is wrong for that same person to steal another’s fund.

Impact on Defi and Users
Let’s assume that Alice is a new DeFi user. If she loses a percentage of her funds while swapping in Uniswap, what do you think will happen to her perception of DeFi? Since she is new, she will be scared and will go back to TradFi where she understands her devil.

DeFi is in its early years, and a bad reputation resulting from attacks will hamper its growth.

Again, Alice will go ahead to tell other people that she has tried out DeFi and it is fraudulent. This will not be a good message about DeFi thus tarnishing its image.

Conclusively, sandwich attack on DeFi is like a fisherman polluting a river with chemicals. If all the fishes get killed, how then do they get fishes in the future? One cannot keep harming their source of livelihood and expect it to be fertile for business. Sandwich attack is unethical and should be nipped in the bud so as to help DeFi flourish.

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