What is MEV Bots?

MEV Bots are automated programs running on the blockchain network, designed to identify and execute trading opportunities that can extract the maximum value. They profit by monitoring pending transactions and using various strategies on decentralized exchanges (DEXs).

Main strategy types of MEV Bots

Arbitrage Bots: Use the price difference of the same assets between different DEXs to buy low and sell high for profit.

Front-running Bots: monitor pending transactions in the meme pool, pay a higher gas fee, and front-run transactions similar to the target transaction to profit from it.

Sandwich attack robot (Clamp Robot): Execute a buy order before the target trade and a sell order after the target trade to profit from the price changes caused by the target trade.

Lightning Loan Bots: Using lightning loans to borrow a large amount of funds without collateral, executing complex arbitrage strategies, and repaying the loan in the same transaction.

Liquidation Bots: Monitor under-collateralized loans in DeFi lending platforms, initiate liquidation, and earn liquidation fees to maintain the health of loan agreements.

The working principle of sandwich attack robot

The sandwich attack Bots achieves profits through the following steps:

1. Monitor the memory pool: Continuously scan pending transactions to find potential large transactions.
2. Quick Analysis: Calculate the potential price impact and potential profit of the target trade.
3. Execute arbitrage trading:
   • Front-running: Buying the same asset with higher gas fees before the target transaction.
   • Back-run: Selling assets immediately after the target transaction to profit from the price difference.
4. Profit acquisition: Making a profit from the price difference caused by trading slippage.

The idea of implementing a sandwich bot

1. Real-time transaction monitoring: Connect to the blockchain node using WebSocket to monitor transactions waiting to be packaged in real time.
2. Filtering and screening: Filter out trades that are irrelevant to the strategy, identify trades related to the target DEX.
3. Dynamically adjust Gas prices: Set a higher Gas price manually to prioritize the processing of bot transactions by miners.
4. Decode trading data: Use smart contract interfaces to decode trading data, determine the tokens and amounts involved in the transaction, and select the appropriate contract invocation method.

Specific tutorial link: https://share.foresightnews.pro/article/detail/75116

MEV Bots’ challenges and risks

While MEV bots may bring substantial profits, they also come with the following challenges and risks:

• High competition: The blockchain space is filled with other MEV bots, leading to intense competition for the same opportunities.
• Gas fees: High gas fees may erode profits, especially when competing with other bots.
• Market fluctuations: Rapid price movements may result in unexpected losses.

How to defend against MEV Bots?

To counter MEV attacks, projects and users can take the following measures:

• Use private trading channels: Send transactions directly to miners through private channels to avoid broadcasting in the public memory pool.
• Optimize slippage settings: Adjust trading slippage to reduce the likelihood of being attacked by traps.
• Implementation time lock: Limit the frequency of trading to prevent bots from conducting rapid consecutive trades.
• Optimize Gas fees: Paying higher Gas fees to increase transaction priority and reduce the risk of sandwich attacks.

Conclusion

MEV Bots provide efficient solutions for arbitrage in the DeFi field, but also bring high-risk competition and challenges. Investors need to fully consider technical implementation, risk control, and market strategies to remain competitive in the ever-changing cryptocurrency market.

To learn more about MEV Bots, you can visit Gate Learn, search for MEV for filtering study, or click the link to go directly:https://www.gate.io/learn/search?query=mev