Back Running
Back running is the act of placing a sell order immediately after a large buy order has been executed.
What Is Back Running in Crypto?
Back running, also known as a back-running attack, is a technique that entails using advanced mempool knowledge to place a trade after a substantial transaction has been executed. To put it simply, the attacker strategically places their own transactions immediately after known, high-value transactions.
The back-runners often capitalize on the ensuing buy pressure to sell their crypto assets at an inflated price, leveraging the arbitrage opportunity created by the target transaction’s impact on asset price.
How Does It Work?
Similar to sandwich attacks and front-running, back-running is a specific type of MEV (Maximal Extractable Value) attack.
Since block producers and MEV searchers (network participants who actively seek MEV opportunities) can access pending transactions, they can place their trades before or after a target transaction if they spot a profitable opportunity. The trades they insert before the original transactions are known as front-running trades. On the other hand, the transactions they place immediately after a major or high-value trade are the back-running transactions.
To put it differently, back-running happens when a validator or searcher executes their sell order immediately after some unconfirmed target transaction. The back-runners aim to benefit from the impact of the original trade on the cryptocurrency’s price. So, while front-run orders cause the original trader to pay more, a back-run order may leave the trader with a less valuable asset than when they bought it.
It typically operates as follows:
- Order execution monitoring – A back-runner uses a bot to monitor pending transactions for large executed buy orders that may inflate the token’s value.
- Immediate response – Once the large trade is executed, the bot immediately places its own sell order to capitalize on the price shift left by the target transaction.
- Profit realization – The back-run bot uses the momentum created by the initial large trade to execute its sell order at the inflated value.
If performed by itself, it simply captures the arbitrage left behind by a large trade order and barely affects the initial transaction itself. However, back-running results in a sandwich attack when combined with a front-running attack.
