Flash Boys 2.0:Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges — great read, but actually seems less about frontrunning and more about arbitrage bots.
Some excerpts that caught my attention below.
Arbitrage is is easier when using Smart Contracts:
"Smart contract arbitrage opportunities have an additional,distinctive characteristic absent in traditional cross-exchange arbitrage. Because of the atomic batch-based processing of transactions, and because transactions can themselves be initiated by smart contracts, is possible to build bots that trade across exchanges through proxy contracts. These proxy contracts can execute batches of orders sequentially within a single transaction, reverting previous trades by throwing an exception if any trade in the batch means arbitrageurs have the opportunity to compose single transactions that execute multiple trades across multiple exchanges atomically, with an all-or-nothing failure model."
Bribing miners with GasToken:
"The dotted orange line on this graph shows the authors’ public release of a token called GasToken . It leverages a feature in Ethereum’s incentive model enabling arbitrageurs to perform gas arbitrage over time, banking gas at below market rates and deploying it to win PGAs. The mechanism by which this gas arbitrage is performed yields a transaction refund in the quantity bid to miners, tricking miners into accepting smaller than expected bids. Because this allows bots to bid higher gas prices for less quantity at the same level of cost,this token is now a requirement for participating competitively in the pure revenue arbitrage market. This is reflected in our trends graph as a sharp downtrend in gas quantity bots demand from miners after release of our token. This anecdote provides unusual insight on consequences of performing active experiments on emerging competitive markets."
Users pleading with bots on Etherscan:
"One unique feature of Ethereum over other market designs is the public nature of some of its trading data. For example,the addresses of the arbitrageurs in Figure 6 are known, and can link different trades by a single actor. This often allows users to see which arbitrage bot targeted a transaction they may have made, and to comment on bot activity on generic public comment pages on blockchain explorers. The top sender in Figure 6, for example, appears to often profit off typographical errors users make in their decentralized exchange trades.5Oneuser, “Getcoin Hub Inc.”, pleads with this arbitrage bot, saying“This was obviously a mistake transaction - any chance you can find it in your heart to send it back?”. Another, Benjamin Huffman, pleads with the bot that “I am a single parent trying to make ends meet at a job I hate. Please have some mercy.”Yet another, Alfie, leaves a comment requesting the return of their ETH, stating ”Please I ask you to send me the ETH back as I really need it to continue my education. I might need tosell my car to pay what is already due for this semester.” Worse still, one user, Rajesh Kumar, claims “sir this was error order.please give back eth sir. this all of my village rupee I trade for them. if i do not receive back eth i will be in the **** sir please”."
Miners can fork and build on blocks to extract value, complicating the security model.
"It is well known that fixed per-block miner rewards area key feature of secure and stable cryptocurrency protocols,as originally described in . In that work, the authors analyze the incentives of blockchain miners in a regime where transaction fees exceed the inflationary subsidy paid to miners by a blockchain protocol. They observe that when the block reward is dominated by fees, rewards have high variance. Asa result, a miner can fork a high-fee block, holding back some fees to attract other miners to build on the fork. In extreme cases, incentives to deviate from the protocol may lead to disruption in miner strategies for economically rational miners,reducing the security provided by block confirmations."
"There are also many other forms of miner-extractable value. Miners can “steal” arbitrage opportunities from arbitragers by taking them themselves.Additionally, the survey in  describes several other sources of MEV, including the ability to buy into profitable ICOs early and the manipulation of games of chance."