MEV Bots

Heard of flash bots for the traditional markets? Well, web3 has its own version and it’s not as sinister as you may think. They’re called MEV (Maximal extractable value) bots. They operate covert bots that trawl the network in quest of potential opportunities. Since 2020, searchers have made between $600 and $700 million on Ethereum alone.

MEV bots usually seem sketchy at first, like a shady bot cartel operating in places that regular people are unable to reach.

However, they are currently changing the way we perceive MEV as the ecosystem has developed, and questions are being raised. Can we genuinely make the best of the situation? How can “good MEV” be promoted? Can we spread these profits out more widely?

Some of these profit opportunities appear to be “better” for the system as a whole than others.

One decentralised exchange might report a token price that is marginally lower than another, for instance. By purchasing the token on the first exchange and selling it on the second, you can make a small profit while bringing the price to equilibrium over time.

That’s actually not all that bad, because now everyone pays the same price!

When the MEV searchers succeed, the other side has a clear loser.

In this case, you choose to “purchase” a million $WTREE tokens. A bot notices your upcoming transaction and notices that $WTREE price is set to increase by 15%. It purchases 100,000 $WTREE by jamming through your own transaction. As soon as you purchase, it sells, allowing the bot to keep 15%.

You lost money, but the bot made some. You had to spend more on your 1 million $WEB3 tokens because the bot purchased 100,000 tokens right before. It sniped you!

As you can see, there are two sides to the story. However, they create massive profitable opportunities for those at the forefront of the bots.

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