XRP Ledger debates solution against front-running on the network’s DEXs

The debate over protecting trades within the XRP Ledger has regained momentum after a proposal presented by David Schwartz, co-founder of the network. The developer suggested a transaction reservation mechanism to reduce the effects of so-called front-running, a practice that can allow participants to gain an advantage over other users' orders before confirmation on the ledger.

The discussion began after XRPresso.io published an analysis claiming that validators and nodes with privileged connections could observe pending transactions before validation. According to the publication, this visibility would open room for certain participants to rearrange their own orders and profit at the expense of ordinary trades carried out by wallets and applications.

According to the analysis, transactions remain temporarily in a public queue before the closing of each ledger. During that interval, operators could calculate whether it would be advantageous to send new orders to change their position in the final execution sequence.

As transaction ordering follows a deterministic formula based on hashes, sending multiple similar operations could increase the chances of securing a more favorable position. In XRPresso's assessment, this would create an advantage for more sophisticated participants, while conventional users could suffer recurring losses during trades on the XRP Ledger DEX.

David Schwartz acknowledged that the issue deserves attention, but disagreed with the idea that validators have a structural advantage. According to him, all network participants can view the same transactions before confirmation, making it unlikely that a single validator could exploit this behavior without being identified.

“If multiple validators conspired, or if a single validator tried to do this, it would be very obvious to everyone who was doing it,” he wrote.

The XRP Ledger co-founder added that there have never been records of attacks of this kind beyond conceptual demonstrations. In his view, the main limitation remains economic, since it would be necessary to find a balance between sufficient liquidity to generate gains and low enough liquidity to move prices in a relevant way.

As an alternative, Schwartz proposed a transaction reservation system. In this model, the user would send in advance a request containing a transaction identifier, a ledger sequence number, and a reservation fee. If the reservation were accepted and the final operation arrived before the end of that block, it would receive priority over any transaction created afterward.

“This ensures that you can execute your transaction before any transaction that was formed after your transaction was disclosed,” the developer explained. “You would use this approach whenever you wanted to carry out a transaction that could not be intercepted or front-run.”

XRPresso responded that the proposal may represent a technical advance, but noted that it would also raise operational costs and increase transaction complexity. In addition, it argued that the mechanism does not completely eliminate the exposure of information during the pre-validation phase, maintaining that solutions based on selective confidentiality could offer a more comprehensive response to the problem.

The debate is also taking place on other DeFi networks. In the previous year, Binance co-founder Changpeng Zhao presented the idea of a perpetual contracts DEX in a dark pool using zero-knowledge proofs to hide order details until their execution. The proposal divided opinions among developers and decentralization advocates, who questioned whether hiding order books could recreate informational advantages that cryptocurrencies seek to eliminate.