You have no idea how much technology has changed things. Earlier, people used to have to wait a long time to execute a trade, but now bots can do it in a matter of seconds, and that too without wasting any of your valuable time.
Today, in this blog, we are discussing in-depth information regarding MEV Bot and its development. After scrolling through this comprehensive guide, you’ll find something extraordinary that will help you in maximizing your profit margin.
Getting curious about what we’re talking about? It’s an MEV bot! It is a robot that typically looks at the upcoming opportunity on the blockchain and tries to make a profit by doing some clever tricks. What could benefit from it? So, with the help of this, users will be able to earn some profit, and that goes along with faster liquidation and efficient arbitrage.
So, look no further; let’s uncover everything related to the MEV bots!
What are MEV Bots?
MEV bots, or Maximal Extractable Value bots, are automated programs created to magnify profit by exploiting opportunities within blockchain transactions. These bots usually work within the DeFi ecosystem and impact the blockchain mechanics. Therefore, these bots are especially effective in blockchains like Ethereum, where miners or inspectors have complete control over transaction grading.
Therefore, MEV bots will draw out the real value from various DeFi activities by analyzing the pending transactions and implementing precise strategies.
However, if we talk about its MEV bot development, these bots have continuously secured prominence within the decentralized finance landscape.
In the year 2024, MEV strategies generated over $30 billion in just 30 days. Arbitrage accounted for more than $7 billion, sandwich trading contributed around $22 billion, and liquidations added approximately $1.5 billion. Additionally, platforms like friend.tech witness over 150 MEV bots collectively earn $4.5 million across more than 30,000 transactions.
Let’s understand MEV bots with an example:
The user intends to purchase a token on a decentralized marketplace.
As a bot, MEV sees this early, buys the token first at a cheaper price, and sells it right after the user’s trade goes through, making a quick profit.
This is called a “sandwich attack.”
How Do MEV Bots Work in DeFi?
After understanding MEV bots, it is very obvious to think, How do these bots work? So, here is the step-by-step process of using these profitable bots.
1. Mempool Monitoring:
The first thing these bots do is continuously scan the public mempool for unsettled transactions. Through this process, the bots will analyze:
● Gas price bids
● Contract interactions
● Transaction volume
Considering the following things gives them a clear-cut forecast regarding how transactions will affect on-chain asset prices.
2. Opportunity Detection:
Once the potential arbitrage, contender, or liquidation moment is noticed, the bot will calculate whether it will be profitable. It will be considered by:
● Gas fees
● Competition
● Slippage
● Network congestion
Herein, only highly optimized opportunities will be chosen to avoid wasting gas.
3. Transaction Construction:
After being done with the following calculation, the MEV bots will raise a custom transaction bundle, which usually involves:
● The transactions that are placed ahead of the target trade
● The user’s intended transaction
● A follow-up transaction
All these transactions will be collected in such a way that allows the MEV bot to benefit from price shifts or protocol changes triggered by the original transaction.
4. Transaction Submission via Flashbots:
In Ethereum, all MEV bots share their transaction bundles to Flashbots. Then this bot will deliver a private communication channel between the explorers and validators. This helps prevent front-running by participating bots and reduces spam in the public mempool.
Pros & Cons of Using MEV Bot
Every good thing has benefits and disadvantages, which is true for MEV bots. Let’s uncover them:
Pros:
● MEV bots are quick to identify and exploit price discrepancies across different platforms, maximizing profit and boosting market efficiency.
● With the help of liquidity, MEV bots can improve the market liquidity while reducing slippage for traders.
● These bots automate some mind-blowing strategies like arbitrage, front-running, and liquidation, while creating consistent profits for every user.
● Liquidation in MEV bots holds the solidity of DeFi protocols, all while addressing unsecured loans.
Cons:
● The MEV bots match for space in blocks, increasing gas prices and making transactions more expensive for regular users.
● These bots engage in front-running and sandwich attacks, which can exploit users by manipulating transaction orders and prices.
● MEV bots can compound market volatility just by manipulating the transaction order and influencing prices.
● Sometimes MEV bots can face competition from other bots, miners, and validators, reducing profitability for all individuals.
Conclusion
In this guide, we have discussed crucial information related to the MEV bots, their pros and cons, and a lot more.
Thus, if you’re looking for the best MEV bot development company, then there is no better option than Technoloader. With experienced developers, end-to-end solutions, and on-time delivery, choosing them as your partner will surely be a noteworthy choice.
So, it’s time to connect with us and take advantage of tailored solutions that drive real results!
