Even during times of severe market turmoil, decentralization remains one of the biggest draws for investors of cryptocurrency and NFTs. The idea is that a user can be the sole proprietor of their assets without a centralized institution keeping tabs, allowing DeFi to grow to a trillion-dollar asset class. Having the opportunity to invest on a level playing field has permitted DeFi to grow to a trillion-dollar asset class. “Leveling playing field” has come under much scrutiny in recent years — as a practice known as front running has abolished the democratic process of executing a transaction on blockchains such as Ethereum and others.
In this article, we’ll discuss what front running is, why you want no part of it (we hope), and what Telos is doing to ensure its ecosystem remains free of this illicit practice. Ready? Let’s get to it.
Front running did not begin with crypto. It’s a term that was coined in the early days of stock market trading, dating back to when stressed-out men in white collared shirts would yell coarsely across a packed room to place a trade. Let’s illustrate the scenario using our devious Stockbroker, Joe. To front-run, Stockbroker Joe would watch the markets and wait patiently for the purchase of a large number of shares in a particular stock. Then, once an ensuing trade was spotted, Stockbroker Joe would “cut the line,” so to speak, of other trades and slip his purchase in at the last minute before the massive purchase could be executed.
The rest, as you might expect, is entirely predictable. The larger purchase would then be processed, spiking the price and thus, giving Stockbroker Joe an instant profit — which he is free to cash in at any time. Sleazy? Yes. Illegal? You bet. Does it happen in crypto? All the time.
Front running in cryptocurrency occurs when block miners or node operators access information about upcoming transactions to leverage their position in a trade. Like our disreputable subject Joe, these individuals, or in some cases programmed bots, quote higher gas prices to ensure their transaction gets placed ahead of others. Gas, a.k.a. GWEI, is the transaction fee a person pays to execute their trade on the blockchain. So, when a miner or someone who deploys bots with the intention of front running identifies a large purchase in the queue, they can up their gas to cut ahead of others and get in before the inevitable price spike occurs from the upcoming larger transaction.
Like so many others in the DeFi space, Telos believes front running is a stain on this novel sector’s overall reputation and has taken significant steps to eliminate it entirely on the Telos network. Telos utilizes a first in, first out process in which gas prices remain the same across all transactions. With all fees being equal, the possibility for front running ceases to exist as the network cannot prioritize a transaction that pays a higher amount in gas fees. It’s also worth noting that this uniform price is exponentially lower than other market competitors.
Telos’ no-front running model is just one of the many features that have lured an ever-increasing number of developers and users to its ecosystem. So, whether you’re long-time crypto or NFT investor, or someone new to the space, take some time to explore all the protocols Telos has put in place to ensure it is the most inclusive, affordable, and eco-friendly network in all of DeFi.
The Telos EVM is the most powerful and scalable Ethereum Smart Contract platform built to power Web 3.0. Telos features a robust, third-generation, ESG compliant evolutionary blockchain governance system, including smart contracts, advanced voting features, and flexible and user-friendly fee models. In addition, Telos supports the blockchain ecosystem by serving as an incubator and accelerator for decentralized applications through development grants. Come build with us.