  Decentralized exchanges (DEXs) allow parties to participate in financial
markets while retaining full custody of their funds. However, the transparency
of blockchain-based DEX in combination with the latency for transactions to be
processed, makes market-manipulation feasible. For instance, adversaries could
perform front-running -- the practice of exploiting (typically non-public)
information that may change the price of an asset for financial gain. In this
work we formalize, analytically exposit and empirically evaluate an augmented
variant of front-running: sandwich attacks, which involve front- and
back-running victim transactions on a blockchain-based DEX. We quantify the
probability of an adversarial trader being able to undertake the attack, based
on the relative positioning of a transaction within a blockchain block. We find
that a single adversarial trader can earn a daily revenue of over several
thousand USD when performing sandwich attacks on one particular DEX -- Uniswap,
an exchange with over 5M USD daily trading volume by June 2020. In addition to
a single-adversary game, we simulate the outcome of sandwich attacks under
multiple competing adversaries, to account for the real-world trading
environment.
