DeFi (Decentralized Finance) has revolutionized the financial industry by providing decentralized alternatives to traditional financial systems. However, this new landscape also introduces operational risks that can potentially disrupt the market. This article examines the various operational risks associated with DeFi and their potential consequences.
3.4 Frontrunning Risk
In a public blockchain, both in-transit orders and executed trades are transparently observed. This means that anyone can see the orders and trades made on the blockchain, including frontrunners who try to exploit the speed advantage of executing trades before others. Frontrunning can lead to market manipulation and insider trading, undermining the security of the blockchain.
