A Ripple for Change: Analysis of Frontrunning in the XRP Ledger

Vytautas Tumas, Beltran Borja Fiz Pontiveros, Christof Ferreira Torres, Radu State

Abstract: Blockchains are disrupting traditional finance by reducing the number of intermediaries and providing transparency. Blockchains, however, come with their own set of prominent issues. One such challenge is frontrunning. Attackers try to influence the transaction order so that their transaction executes before their victims' transaction. While frontrunning is a well-studied topic on Ethereum, it is unknown whether other blockchains are also susceptible to such attacks. One proposed defence strategy against frontrunning attacks is to randomize the transaction execution order. XRP Ledger is the highest-value blockchain to use such a strategy. Furthermore, it runs a Decentralized Exchange, which provides ample frontrunning opportunities. Therefore, in the context of XRP Ledger, we examine whether randomized transaction order provides sufficient protection against frontrunning. Our results show that the mechanism embedded in the XRP Ledger protocol is insufficient to prevent these attacks. We showcase two strategies to perform frontrunning attacks. The first, “naive” strategy, uses randomly generated accounts, whereas the second uses carefully selected accounts to improve the attack's success. Based on our analysis of the XRP Ledgers' historical data, we estimate that attackers could generate up to approx. 1.4M USD profit over two months, provided they succeeded to frontrun every opportunity.