n-MVTL Attack: Optimal Transaction Reordering Attack on DeFi

Abstract

Decentralized finance (DeFi) is a global and open financial system built on the blockchain technology, typically using Ethereum smart contracts. Decentralized exchanges (DEXs) are very important sectors in the DeFi ecosystem, with billions of USD trading volume daily. Unfortunately, the transparency of pending pools can be exploited by attackers and DEXs are vulnerable to transaction reordering attacks, allowing attackers to gain miner extracted value (MEV). Previous transaction reordering attacks aim at exploiting the vulnerability of a single victim transaction, such as sandwich attack and dagwood sandwich attack. In this paper, we propose a novel transaction reordering attack named n-multiple-victim-transaction-layer (n-MVTL) attack to exploit the overall vulnerability among multiple victim transactions. Such advanced design can significantly expand the victim transaction search space and bring more profits to attackers. Given a set of ordered victim transactions, we propose an optimal algorithm to identify the optimal solution for n-MVTL attacks, which aims to maximize the profit of the attack strategy. This algorithm supports a trade-off between time efficiency and attack profit, making the attack algorithm more practical. Our simulations show that the n-MVTL attack can yield an average extra daily profit of 940 USD from the top 2 most popular liquidity pools in Uniswap V2 from Mar. 2021 to Apr. 2023, compared with the sandwich attack.