MEV bot makes $1.7 million on a single Dogwifhat deal that was deemed “inefficient”

Written by Rock Buivy

Post Date: 17 Jan, 24

The astounding amount was obtained by a maximum extractable value (MEV) bot headquartered in Solana that outran a trader when they bought $8.9 million worth of memecoin.

In one dubious deal, a trader paid $9 million for memecoin Dogwifhat (WIF) “in the most inefficient way possible,” which allowed a Solana-based maximum extractable value (MEV) bot to profit a whopping $1.7 million.

According to Solscan statistics, the maximum extractable value (MEV) bot, operated by 2fast, exchanged 490,000 WIF for 703 Solana and then converted the same quantity of WIF into 19,035 SOL within the same transaction bundle. This allowed the bot to make $1.73 million.

MEV bots are computer programs that automatically search blockchain networks for lucrative trading opportunities and then carry out the orders without human intervention.

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The bot made use of a tool created by Jito Labs, the Jito liquid staking protocol’s development branch. The application enables bots to look for the highest extractable value and submit bids to be included in the transaction bundle. It functions similarly to flashbots on the Ethereum network.

This abrupt arbitrage maneuver was made possible by a deal made by zeroxtrading.sol, a single trader who bought an incredible $8.9 million worth of memecoin in one order.

Due to the excessive bid placed in a pool with little liquidity, the order was completed at a rate of almost $3 for each WIF token – roughly 1,400% higher than the token’s current value.

The trader lost 92% of their money right away in the subsequent and instantaneous decrease that followed the deal.

The pseudonymous developer Pland claimed in a post on January 11 on X (formerly Twitter) that the MEV bot used a very basic backrunning technique to obtain the profit from the trader who carried out the WIF order in the most “inefficient way possible.”

Since backrunning doesn’t affect the original deal and simply takes advantage of the arbitrage opportunity provided by a huge mispriced trade, it is seen to be less damaging to a blockchain network.

In comparison, the more sinister “sandwich” assaults entail sandwiching an order between two transactions in order to reprice the initial bid. This typically results in a loss for blockchain users and affects the initial deal price.

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In all, the one transaction sent WIF’s price skyrocketing to $4 for a brief period of time.

The enormous candle encouraged degens to start buying WIF again, despite the trader still being severely out of pocket for their lost order. The memecoin posted a 50% gain from the point just after the crash.

What is the MEV bot?

MEV bots are computer programmes that scan DeFi for arbitrage opportunities and automatically carry out MEV-based tactics.

Wider communities can now access MEV bots thanks to Ethereum’s switch to PoS. Since Bitcoin lacks the smart contract feature, MEV strategies are irrelevant to this network.

Solana Mev Bot

Solana Mev Bot – a game-changing cryptocurrency bot that is revolutionizing the way traders operate in the digital asset space.

With its advanced algorithm and cutting-edge technology, this bot provides unparalleled access to opportunities for maximum value extraction in the crypto market.

A Solana MEV Bot is a software program designed to monitor the Solana blockchain for profitable opportunities related to Miner Extractable Value (MEV).

Its function is to extract MEV from the network by identifying and executing trades that take advantage of the order in which transactions are included in blocks.

These bots continuously monitor the chain for transactions that can be front-run or sandwiched, allowing them to make trades at the expense of other network participants. By exploiting the order of transactions, Solana MEV Bots are able to extract MEV by executing trades at advantageous prices before they are officially recorded on the blockchain.

The role of these bots is to act as automated traders on behalf of searchers, who are typically entities seeking to take advantage of MEV opportunities. By utilizing sophisticated algorithms and high-speed transaction execution, Solana MEV Bots are able to identify and capitalize on profitable opportunities in the Solana network’s MEV landscape.

Understanding Solana and its Low-Liquidity Pool

A low-liquidity pool on Solana refers to a pool with limited funds available for trading. This can have a significant impact on arbitrage trading, as it may lead to price slippage and decreased opportunities for profit.

The Solana community has expressed concerns about low-liquidity pools, as they can potentially hinder the efficiency of the network and limit the overall trading experience.

While low-liquidity pools can offer benefits such as reduced risk of impermanent loss for liquidity providers, they can also have drawbacks.

For instance, these pools may result in higher transaction fees and limited trading opportunities, making it challenging for traders to execute efficient trades. This can ultimately affect the overall trading experience and liquidity provision on the Solana network.

Explaining Solana blockchain network

Solana is a high-performance blockchain network known for its fast transaction speeds and low fees. Its architecture is designed to support high throughput and scalability through its unique Proof of Stake consensus algorithm.

Solana employs a network of validators who stake their tokens to validate transactions and produce new blocks. There are currently over 1,000 validators and around 1,500 full nodes on the Solana network.

Transactions on Solana have key distinctions, including a novel transaction lifecycle that leverages the network’s high-speed capabilities to achieve finality in a matter of seconds. Additionally, Solana provides MEV (Miner Extractable Value) opportunities, allowing users to optimize their transaction ordering to maximize their yields.

Solana’s unique features, such as its Proof of Stake consensus and high throughput, set it apart from other blockchain networks, making it an attractive option for developers and users looking for fast and low-cost transactions on a secure and scalable platform.

How MEV Bots Exploit Arbitrage Opportunities

MEV (Miner Extractable Value) bots utilize advanced algorithms to identify price differences across various decentralized exchanges in the DeFi space.

These bots are designed to execute trades in a matter of microseconds, exploiting the price gaps to generate profits. By quickly capitalizing on these arbitrage opportunities, MEV bots can take advantage of inefficiencies in the market and potentially earn significant returns.

Overall, the use of MEV bots to exploit arbitrage opportunities in the DeFi space highlights the increasing sophistication of algorithmic trading in decentralized finance and the potential for significant influence on market dynamics and trader behavior.

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