What are MEV and MEV bots?

In the crypto world, MEV bots create risks for users and networks through arbitrage, sandwich, and liquidation attacks. Communities seek protective measures and security precautions.

In the current cryptocurrency ecosystem, Pre-Mining Value (MEV) has become a dynamic part of the crypto world, causing increasing concern among miners and liquidity providers. MEV refers to the potential profit obtained by including a transaction in the blockchain and can be extracted using various strategies. The inherently competitive nature of MEV has led to competition and even attacks among those seeking to profit. MEV bots are among the most notable examples of these attacks.
The extraction of MEV is determined by various factors, ranging from fluctuations in cryptocurrency asset prices to how liquidity providers place their transactions on the blockchain. For instance, including a significant transaction in the blockchain provides an opportunity for a participant to alter the price in their favor, enabling MEV bots to operate effectively.
MEV bot attacks can be executed through various methods. Different tactics, such as sequencing attacks, sandwich attacks, transaction frontrunning, and transaction reordering, assist attackers in maximizing their MEV extraction.
However, the potential risks posed by MEV bots on users and the network cannot be ignored. Especially in decentralized finance (DeFi) applications, users may risk losing their funds or unnecessarily paying high transaction fees. Such attacks also threaten network security, encouraging participants to be cautious and take security measures.

Types and Effects of MEV Bot Attacks

• Sequencing Attacks: MEV bots can advantageously rearrange transactions sent to the blockchain by exploiting the ability to execute transactions at a predetermined block number. This manipulation of prices allows them to achieve higher profits at the expense of various parties, including liquidity providers, centralized exchanges, and even users.
• Sandwich Attacks: In these attacks, MEV bots target participants who try to obtain the best price for an asset by using the previous transaction to include a transaction in the blockchain. By inserting their transactions in between, MEV bots profit from the price difference, potentially causing losses to other participants.
• Transaction Frontrunning and Reordering: MEV bots can either prevent certain transactions from taking place or modify a transaction to execute a targeted transaction. This creates a significant disadvantage for users unable to execute their intended transactions and may jeopardize investors’ funds.

Types of MEV Bots
MEV bots elevate MEV by engaging in different methods to gain advantages. The primary types of MEV bots include:

• Arbitrage Bots: These bots exploit price differences between various cryptocurrency exchanges to generate profits. For example, they can buy an asset at a low price on one exchange and sell it at a higher price on another.
• Sandwich Bots: Sandwich bots aim to profit by targeting and manipulating transactions made by other participants. They alter transactions before they are added to the blockchain, putting other participants at a disadvantage.
• Liquidation Bots: Liquidation bots seek to profit from weak positions that may arise during leveraged trades or lending operations. This can lead to users being liquidated, and they effectively capitalize on opportunities during liquidation events

As an example of sandwich bots, we can refer to the MEV bot created by “jaredfromsubway.eht”. Launched in February, this bot achieved significant volume by sandwiching crypto users and out-competing rival bots. According to EigenPhi, which compiles MEV data, the bot executed 238,000 attacks during its operation, resulting in financial losses for 106,000 individuals. An MEV expert referred to as “Yannick,” estimated that it generated profits ranging from 3.5 million to 4.5 million dollar.

Prevention or Mitigation of MEV Bot Attacks

• Transaction Pool Ordering: Some blockchains adopt a method of ordering transactions based on transaction pools. This can reduce or prevent the impact of sequencing attacks.
• Fee High Limits: Raising the transaction fees above a certain threshold can decrease the effectiveness of transaction frontrunning and transaction reordering attacks.
• MEV Challenges: Implementing MEV challenges provides a mechanism that requires MEV bots to solve or extract a specific transaction before organizing transactions, making attacks more difficult.

Potential Benefits of MEV Bot Usage

MEV bot usage is a concern due to their risks and dangers but they also have the potential to enhance network efficiency. Optimizing transaction fees on blockchains can help users confirm their transactions faster and conduct transactions at lower costs. Additionally, it may offer a better trading experience for liquidity providers and traders who take advantage of arbitrage opportunities.

Conclusion

MEV bot attacks play a significant role in the cryptocurrency ecosystem and pose serious risks to participants. However, as a community, we can take various measures to prevent or at least mitigate such attacks. This will help us achieve our goal of creating a more secure and efficient cryptocurrency ecosystem. Given the evolving nature of MEV bots and attacks, it is crucial to raise awareness and stay updated, enabling users and the network to be better prepared and more resilient against future threats.
MEV bots can disadvantage participants such as users and liquidity providers, undermine network integrity, and create security risks. However, as a community, we can work on ways to prevent and reduce such attacks.
Potential solutions for prevention or mitigation include mechanisms like transaction pool ordering, fee high limits, and MEV challenges. These measures can reduce the effectiveness of MEV bots and help participants transact in a safer manner.
Lastly, it is worth noting the potential benefits of MEV bot attacks. MEV bots have the potential to enhance network efficiency and facilitate faster and more cost-effective transactions for users by optimizing transaction fees.