Robot Crypto Traders Are the New Flash Boys
Fast-moving token traders are cutting in line to front-run other people’s orders.
Cryptocurrency traders call it the “sandwich” maneuver, and nobody wants to be the turkey caught in the middle. Here’s how it works: You spot another trader on the network trying to buy a token, such as Ether or another so-called altcoin. Then you place an order, too. If you are able to get your purchase done before the other trader, you’ll get a good deal on a coin you know there’s demand for. Your purchase pushes up the price the other buyer has to pay. Completing the sandwich, you sell for an easy profit.
This sort of front-running has long been a problem for people trading crypto. It happens on decentralized exchanges that run on a technology called Ethereum, because transactions are visible for a time before they are completed. Computer programs called bots scour the network for such opportunities, and the practice has exploded recently, thanks to the release of a free, open source tool called Flashbots.