Automated Trading Tools in the Blockchain Ecosystem: Focusing on Sandwich Bots

Against the backdrop of the continuous development of blockchain technology, the cryptocurrency trading ecosystem is rapidly expanding. The decentralized exchange (DEX), with its characteristics of disintermediation and high transparency, has become an important platform for digital asset trading. As the market matures, various automated trading tools have emerged. Among them, the MEV( maximum extractable value ) Bots are automated programs that execute strategies and other trades on the blockchain network. These Bots maximize value extraction by reordering, inserting, or delaying blockchain transactions. This article will delve into the definition, principles, implementation methods, key factors, and future optimization directions of sandwich Bots.

With the advancement of technology and changes in market demand, bots have also evolved into various types to adapt to different trading environments and strategy requirements. Here are several common types of bots:

1. Sandwich Clip Bots

These bots monitor large orders in the trading pool and submit transactions with higher Gas fees ahead of these orders being officially placed on the Blockchain, thereby completing the transactions before users. This strategy involves inserting transactions before and after the target transaction ( to manipulate prices and profit from it.

2. Brick Moving Bots

These bots focus on profiting from price differences between different DEXs. They buy assets at a low price on one exchange and then sell them at a high price on another exchange to make a profit. This strategy requires the bots to quickly identify price fluctuations between different exchanges and execute trades swiftly.

3. New Token Release Bots

These bots mainly focus on the price fluctuations during the issuance of new tokens. When new tokens are just launched on the DEX, the prices are usually unstable and fluctuate significantly. The clip bots will quickly buy the tokens as soon as they are listed and sell them after the price rises to profit from the difference. These types of bots need to closely monitor the release dynamics of new projects and have the ability to place orders quickly.

4. Liquidity Pool Arbitrage Bots

Liquidity pool arbitrage bots perform arbitrage by transferring assets between different liquidity pools. They look for price discrepancies between different pools, conducting liquidity provision and withdrawal operations to realize profits. This requires the bots to efficiently manage liquidity and quickly respond to price changes within the pools.

5. Flash Loan Arbitrage Bots

The flash loan arbitrage Bots utilize the characteristics of flash loans to conduct trading. Flash loans allow users to borrow a large amount of funds within a single transaction without collateral. Bots can use these funds to manipulate market prices within a short period to achieve arbitrage. For example, using a flash loan to push up prices in one pool and then profiting in another pool.

6. Triangular Arbitrage Bots

Triangular arbitrage involves trading between three different token pairs to take advantage of exchange rate differences for profit. For example, by trading A/B, B/C, and then trading C/A in a loop to realize profits. This type of Bots requires complex calculations and fast trade execution capabilities.

This article will focus on analyzing sandwich clip bots.

1. Sandwich Clip Bots

The sandwich grabber Bots is an automated trading tool specifically designed to profit from front-running trades on decentralized exchanges. It quickly captures on-chain trading opportunities, executing trades before or after the target transaction to earn the price difference. The core of the sandwich grabber Bots lies in seizing trading opportunities with high efficiency and speed.

2. The Principle of Sandwich Clipper Bots

The profit operations of the sandwich clip robot are based on the following basic principles:

1. Front Running: Before other users' buy orders are packed into the Block by miners, Bots buy the target token at a lower price. When users' orders are executed and push the price up, Bots quickly sell to capture the price difference.

2. Backrunning: Before other users sell their tokens, the Bots sell at a higher price first. When the users' sell orders drive the price down, the Bots then buy back at a lower price, thereby realizing a profit.

A so-called clamping device refers to capturing trading users to earn the price difference. The success of clamping Bots relies on precise timing of trades and high priority in trade execution.

3. Implementation Idea

1. Real-time monitoring of transactions:

   • Use WebSocket to connect to Blockchain nodes and listen in real-time for transactions to be packaged.
   • Filter target transactions by comparing the transaction.to or transaction.from fields to identify transactions related to the target DEX.

2. Screening and Filtering:

   • Filter out trades that are irrelevant to the strategy and trades from one's own address to prevent deadlocks caused by self-trading.

3. Dynamic adjustment of Gas price:

   • Manually set a higher Gas price to prioritize the processing of Bots' transactions by miners, allowing them to execute before regular users.

4. Decode transaction data:

   • Use the smart contract interface ) to decode transaction data with Interface( in ethers.js, and determine the tokens and amounts involved in the transaction.
   • Select the appropriate contract call method based on the decoded information, such as swapExactETHForTokens or swapTokensForExactTokens.

4. Code Ideas

1. Create a listening ws service:

javascript const WSS_URL = wss://api.example.com/node/ws/v1/eth/mainnet/${YOUR_KEY} const WssProvider = new ethers.providers.WebSocketProvider)WSS_URL(; WssProvider.on)"pending", (tx( => { // TODO })

2. Filter these transactions:

javascript WssProvider.on)"pending", (tx( => { if )transaction && transaction.to && transaction.to.toLowerCase(( === ROUTER.toLowerCase)( && transaction.from !== blackAddress) { // TODO } })

3. Determine the transaction direction, manually set the Gas price:

javascript function calculate_gas_price)action, amount( { if )action === "buy"( { return amount.add)100000000( // 0.1 Gwei } else { return amount.sub)100000000( // 0.1 Gwei } }

4. Decoding transaction method, calling function:

javascript const iface = new ethers.utils.Interface)abi( const result = iface.decodeFunctionData('swapExactETHForTokens', transaction.data)

V. Deciding Factors

The effectiveness and success of the clipper bot are closely related to various factors:

1. Transaction Speed:

   • Network latency and node response speed directly affect the reaction time of Bots. Using high-performance node services can reduce latency, and some services also offer support for independent nodes.

2. Gas Fee:

   • When seizing trading priority, Gas fees are an important consideration. Excessively high Gas fees can eat into profits, so a balance must be found between speed and cost.

3. Market Liquidity:

   • High liquidity helps to execute large trades quickly without significantly affecting market prices. Insufficient liquidity may lead to increased slippage or failed transactions.

4. Contract Security:

   • The security of the target contract is directly related to the risk of strategy operations. Bots must have the basic ability to verify contract code to avoid transactions being exploited by malicious contracts.

5. Competitive Environment:

   • There may be multiple arbitrage Bots in the market competing for profit opportunities. When competition is fierce, the success rate of transactions and profits may be affected.

Conclusion

MEV Bots provide an efficient solution for arbitrage in decentralized exchanges. By analyzing in real-time and executing quickly, they can gain an advantage in the market. However, clip bots also face challenges of high competition and high risk. Investors need to comprehensively consider technology implementation, risk control, and market strategies to remain competitive in the ever-changing cryptocurrency market. In the future, with advancements in technology and the expansion of the DeFi ecosystem, clip bots are expected to play a greater role in more areas, creating more value for users.