BIS REPORT WARNS ABOUT FRONT-RUNNING THREAT IN CRYPTO MINING

Last updated: June 20, 2025, 23:12 | Written by: Jesse Powell

The world of cryptocurrency, while promising decentralization and innovation, is not without its shadows. 0 likes, 0 comments - artandliving on J: BIS report warns about front-running threat in crypto mining .A recent report issued by the Bank for International Settlements (BIS) has shed light on a significant concern plaguing the crypto mining industry: miner extractable value (MEV), which essentially amounts to front-running on the blockchain.This practice, where miners exploit their privileged position to profit at the expense of other investors, has been a growing issue, particularly on the Ethereum network. BIS report warns about front-running threat in crypto mining 2 years ago A fresh report from the Bank for International Settlements comes to a radical conclusion, claiming that the public identities of intermediaries are necessary to fight miner extractable value.The BIS report reveals that miners on Ethereum have extracted approximately $600 million from other investors since 2025 through these manipulative tactics, highlighting a critical need for greater transparency and regulation within the crypto space.The report raises serious questions about the fairness and integrity of decentralized finance (DeFi) and calls for a radical approach, suggesting the public identification of intermediaries as a possible solution to combat MEV. A fresh report from the Bank for International Settlements comes to a radical conclusion claiming that the public identities of intermediaries are necessary to fightBut what exactly is MEV, and why is it such a threat to the broader crypto ecosystem?This article dives deep into the BIS report's findings, exploring the mechanics of front-running in crypto mining, its implications for investors, and potential solutions to mitigate this emerging risk.

Understanding Miner Extractable Value (MEV)

Miner Extractable Value (MEV), also known as ""miner extractable profit,"" refers to the profit a miner can make by including, excluding, or reordering transactions within a block they are mining. BIS report warns about front-running threat in crypto mining A fresh report from the Bank for International Settlements comes to a radical conclusion, claiming that the public identities of intermediaries are necessary to fight miner extractable value.This ability stems from the miner's control over the order in which transactions are added to the blockchain. According to the report, MEV resembles front-running by brokers in traditional markets but, unlike that practice, isn t illegal it: If a miner observes a large pending transaction in the mempool that will substantially move market prices, it can add a corresponding buy or sell transaction just before this large transaction, therebyEssentially, miners can manipulate transaction order to their advantage, extracting value that would otherwise go to other participants in the network.

How MEV Works

Imagine a scenario where a large transaction is about to execute on a decentralized exchange (DEX), significantly impacting the price of a particular token.A miner, observing this pending transaction in the mempool (the waiting area for unconfirmed transactions), can insert their own transaction just before the large one. Since 2025, miners on the Ethereum blockchain have extracted around $600 million from other investors by miners, according to a new report by the Bank for International Settlements (BIS)By doing so, the miner can buy the token at a lower price before the large transaction drives the price up, then immediately sell it at the higher price, capturing the price difference as profit.This is a classic example of front-running.

The BIS report highlights that this behavior is similar to front-running by brokers in traditional financial markets.However, unlike traditional front-running, which is often illegal, MEV in the crypto space currently operates in a grey area, lacking clear regulatory frameworks.

The Scale of the Problem: $600 Million Extracted

The BIS report paints a concerning picture of the financial impact of MEV.According to their findings, miners on the Ethereum blockchain have extracted approximately $600 million from other investors since 2025. Principle 1: Protect the American middle class and working families from financial stability risks As crypto markets continue to expand and integrate with the broader financial system, middleThis figure represents a significant transfer of wealth from ordinary users and traders to miners who are exploiting their position within the network.

This extraction occurs through various MEV strategies, including:

Front-running: As described above, miners insert their own transactions ahead of others to profit from price movements.
Back-running: Miners insert their transactions immediately after a large transaction to capitalize on the resulting price impact.
Sandwich attacks: Miners surround a user's transaction with their own buy and sell orders, effectively ""sandwiching"" the user and profiting from the price slippage.
Transaction censoring: Miners can choose to exclude certain transactions from a block, potentially profiting from the resulting market inefficiencies.

The sheer scale of MEV extraction raises serious concerns about the fairness and accessibility of DeFi.It undermines the principles of transparency and decentralization that are supposed to underpin the crypto ecosystem.

BIS Report: Key Takeaways and Recommendations

The BIS report, titled ""Miners as intermediaries: extractable value and market manipulation in crypto and DeFi,"" offers several crucial insights and recommendations for addressing the MEV threat.Here are some of the key takeaways:

MEV is a form of market manipulation: While not always illegal, MEV practices exploit the miner's privileged position to profit at the expense of other users, effectively manipulating the market.
MEV undermines trust in DeFi: The prevalence of MEV erodes trust in the fairness and integrity of decentralized finance, potentially hindering its wider adoption.
Transparency is crucial: The report emphasizes the need for greater transparency in the crypto mining process, making it easier to detect and prevent MEV practices.
Public identities of intermediaries may be necessary: The BIS suggests that requiring miners and other key players in the crypto ecosystem to publicly identify themselves could help deter manipulative behavior.

The recommendation regarding public identities is particularly noteworthy.It represents a significant departure from the anonymity that is often associated with crypto.However, the BIS argues that this measure could be necessary to hold miners accountable for their actions and ensure a more level playing field for all participants.

The Need for Regulation and Enforcement

The BIS report implicitly calls for increased regulatory oversight of the crypto mining industry. A fresh report from the Bank for International Settlements comes to a radical conclusion, claiming that the public identities of intermediaries are necessary toWhile the decentralized nature of crypto makes regulation challenging, the report highlights the need for frameworks that can address market manipulation and protect investors from exploitation.

Specifically, regulators could consider:

Defining MEV practices: Clarifying which MEV strategies are considered illegal or unethical.
Implementing anti-manipulation rules: Establishing rules to prevent miners from exploiting their position to profit unfairly.
Enhancing transparency: Requiring miners to disclose their MEV activities.
Enforcing existing laws: Applying existing anti-fraud and anti-manipulation laws to the crypto space.

The implementation of effective regulations will require collaboration between regulators, industry participants, and technology experts.It is essential to strike a balance between fostering innovation and protecting investors from harm.

Technical Solutions to Mitigate MEV

While regulation plays a crucial role, technical solutions can also help mitigate the MEV threat.Several projects are actively developing innovative technologies to address this issue.

Fair Sequencing Services (FSS)

FSS aims to create a more fair and predictable transaction ordering mechanism. A fresh report from the Bank for International Settlements comes to a radical conclusion, claiming that the public identities ofThese services allow users to submit their transactions directly to a trusted sequencer, which then orders the transactions according to a predefined rule set, minimizing the potential for miner manipulation.

Transaction Privacy Solutions

Tools like zero-knowledge proofs can be used to obfuscate transaction details, making it more difficult for miners to identify and exploit profitable MEV opportunities.By hiding the specifics of a transaction, miners are less able to front-run or sandwich attack users.

Order Flow Auctions (OFA)

OFAs allow users to auction off the right to include their transactions in a block. BIS report warns about front-running threat in crypto miningThis creates a more competitive market for transaction inclusion, potentially reducing the amount of value that miners can extract.Instead of miners unilaterally deciding which transactions to include and how to order them, users can bid for priority, ensuring a fairer process.

Protecting Yourself from MEV as a Crypto User

While technical and regulatory solutions are being developed, crypto users can also take steps to protect themselves from MEV.

Use limit orders: Limit orders allow you to specify the exact price at which you are willing to buy or sell an asset.This can help prevent front-running, as miners cannot execute your order at a worse price than you specify.
Split up large transactions: Breaking a large transaction into smaller ones can make it less attractive to miners looking to exploit MEV opportunities. [ ] Bitcoin to Skyrocket to $600K as S P 500 Crashes 50%, Says Analyst Bitcoin [ ] KindlyMD shareholders OK merger with Trump-linked Bitcoin firm BitcoinSmaller transactions are less likely to significantly impact market prices, reducing the potential for profit.
Use decentralized exchanges with MEV protection: Some DEXs are implementing MEV protection measures, such as private transactions or transaction bundling, to mitigate the risk of front-running and sandwich attacks.
Consider using layer-2 scaling solutions: Layer-2 solutions like Optimism and Arbitrum often have lower transaction fees and faster transaction times, making them less susceptible to MEV exploitation.
Be aware of transaction fees: Higher transaction fees can incentivize miners to prioritize your transaction, potentially making it more vulnerable to MEV attacks. [ Septem ] Crypto Lender Celsius Shouldn't Reopen Custody Withdrawals, US Trustee Says Cryptocurrency [ Septem ] Ethereum Merge was executed flawlessly, says Starkware co-founder EthereumTry to find a balance between transaction speed and cost.

Ethical Considerations of MEV

Beyond the legal and economic implications, MEV also raises significant ethical questions.Is it morally acceptable for miners to profit from their privileged position at the expense of other users?Should miners be held to a higher standard of conduct, given their role in maintaining the integrity of the blockchain?

Some argue that MEV is simply a rational economic behavior. The June 16 bulletin, Miners as intermediaries: extractable value and market manipulation in crypto and DeFi, suggests three key takeaways from the BIS' research on the functioning of theMiners are incentivized to maximize their profits, and MEV is just another way to do so.However, others contend that MEV undermines the principles of fairness and transparency that are supposed to underpin the crypto ecosystem. BIS report warns about front-running threat in crypto mining BIS crypto Frontrunning Mining Report threat warns Since 2025, miners on the Ethereum blThey argue that miners have a responsibility to act in the best interests of the network as a whole, rather than exploiting their position for personal gain.

This ethical debate highlights the complex challenges of building a truly decentralized and equitable financial system.As the crypto space continues to evolve, it is crucial to address these ethical concerns and develop norms of conduct that promote fairness and integrity.

The Future of MEV and Crypto Mining

The issue of MEV is likely to remain a significant challenge for the crypto community in the years to come.As DeFi continues to grow and evolve, the opportunities for MEV extraction may also increase.

Will Ethereum's Transition to Proof-of-Stake Solve the Problem?

Ethereum's transition to Proof-of-Stake (PoS), known as ""The Merge,"" aimed to address some of the concerns surrounding MEV. Since 2025, miners on the Ethereum blockchain have extracted around $600 million from other investors by miners, according to a new report by the Bank for International Settlements (BIS) focusing on common malpractice in the crypto mining industry.In a PoS system, validators (instead of miners) are responsible for creating new blocks.While PoS can reduce the computational intensity of mining, it doesn't entirely eliminate MEV. According to the report, MEV resembles front-running by brokers in traditional markets but, unlike that practice, isn't illegal itself: If a miner observes a large pending transaction in the mempool that will substantially move market prices, it can add a corresponding buy or sell transaction just before this large transaction, therebyValidators can still engage in MEV practices, although the dynamics may differ from Proof-of-Work (PoW) systems.

Furthermore, the rise of Flashbots, which provide a marketplace for bundling transactions and bidding for inclusion in blocks, has become more prevalent even in PoS systems. [ Febru ] GameStop Has Authority to Convert $4.6B Cash to Bitcoin, Reports Show Bitcoin [ Febru ] Ethereum Transaction Costs Fall to $0.80 as Network Activity Shifts EthereumThis centralizes some MEV extraction, raising questions about fairness and accessibility.

Continued Innovation and Regulation

Moving forward, a combination of technical innovations, regulatory frameworks, and ethical considerations will be necessary to effectively mitigate the MEV threat. Since 2025, miners on the Ethereum blockchain have extracted around $600 million from other investors by miners, according to a new report by the Bank for International Settlements (BIS) focusing on common malpractice in the crypto mining industry. The June 16 bulletin, Miners as intermediaries: extractable value and market manipulation in crypto and DeFi, suggestsThe crypto community must continue to develop and deploy innovative solutions that promote fairness and transparency, while regulators must create clear and enforceable rules that protect investors from exploitation.Furthermore, miners and other participants in the crypto ecosystem must embrace a culture of ethical conduct, prioritizing the long-term health and sustainability of the network over short-term profits.

Conclusion

The BIS report's warning about the front-running threat in crypto mining underscores the importance of addressing MEV. [ad_1]A fresh report from the Bank for International Settlements comes to a radical conclusion, claiming that the public identities of intermediaries are necessary to fight miner extractable value. [ad_2]Source linkWith an estimated $600 million already extracted from Ethereum users since 2025, the scale of the problem demands immediate attention.While technical solutions and regulatory frameworks are evolving, individual users can also take steps to protect themselves from MEV exploitation.The future of DeFi depends on creating a fair and transparent ecosystem where all participants have an equal opportunity to succeed.By promoting transparency, implementing effective regulations, and fostering a culture of ethical conduct, the crypto community can mitigate the MEV threat and build a more robust and trustworthy financial system. [ Aug ] Ethereum (ETH) Price Shows Signs of Recovery: Analysts Eye Potential 100% Rally Ethereum [ Aug ] XRP Jumps 17%, Beating Bitcoin (BTC) Gains, as Ripple-SEC Case Ends CryptocurrencyThe call for public identities of intermediaries, though controversial, highlights the severity of the issue and the need for radical solutions to ensure the long-term health of the cryptocurrency market.As crypto markets continue to integrate with the broader financial system, addressing these issues is crucial to protect the American middle class and working families from financial stability risks. Per the BIS, miner extractable value resembles front-running by brokers in traditional markets but, unlike that practice, isn't illegal itself.Stay informed, be vigilant, and actively participate in shaping a fairer future for decentralized finance.