For the uninformed, Front-Running is simply a phrase in the stock market that refers to utilizing insider information about most of the impending deals. Interestingly, this trading is not just limited to the stock market and the decentralized finance space. Instead, it can also happen in the marketplace of NFT.
In this particular scenario, it takes place because an insider at a platform for NFTs would know which of the NFTs would be featured heavily on most of the trading sites. Also, with this knowledge, they would also be able to buy an NFT before it starts getting featured- which would increase its price. The price of the NFT increased since NFTs are publicized to sell- and the insider, on their part, make a tidy sum.
Front-Running Bots Have Been Pretty Fast and Loose In The Crypto World
This form of front-running is referred to as insider trading, with the assets being traded based on non-public information. For instance, in September of 2021, Nate Chastain, the head of the product at OpenSea, the NFT marketplace, was found to have purchased a few NFTs just before they were being highlighted on the site of OpenSea. He then went out and sold them at a massive profit. Needless to say, he did take quite a massive advantage of insider information such as which NFTs would the marketplace be pushing for in order to secure quite an unfair advantage.
Now, a front-running bot is just another algorithm that scans most of the pending transactions and ends up paying a more significant gas fee so that most of the miners would be able to process the transaction first to front-run a big trade that would be affecting the market pricing of the society.
Most of the front-running bots are usually pre-programmed programs that would allow one to automate their trading. Rather than bringing forth every move in the market and waiting for a good time to pounce, the bot would be automatically synthesizing and assessing most of the market data. The bot would also make asset transactions on the behalf of the customers.