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Do you want to benefit from the opportunities in decentralized exchanges (DEX) and decentralized finance (DeFi) protocols? Then, it's time to create your own MEV bot. The rise of the MEV bot in cryptocurrency trading has become one of the significant features with its rapidly evolving technologies and techniques.
The MEV (Maximal Extractable Value) bots are advanced tools that are designed to control transaction order and unlock the remarkable profit opportunities like sandwich trade, front running, and back running. This has driven a surge in demand for MEV bot development and encouraged businesses to partner with a reliable MEV bot development company to maximize financial gain and leverage the blockchain ecosystem for profitability.
At the initial stage, this concept was started to work with the Ethereum platform, and now it is applicable across various blockchain networks. However, creating an MEV bot requires a deep knowledge of smart contracts, blockchain techniques, and other mechanisms. This blog aims to explain how to start your own MEV from scratch in a more accessible way.
MEV Bot, also known as Miner Extractable Value Bots or Maximum Extractable Value Bots, is a software tool that is designed to monitor the blockchain networks (like Ethereum), especially in decentralized finance (DeFi).
These bots are used to find profitable opportunities and new transactions, enabling users to carry out transactions independently and smoothly. Eventually, these automated programs increase the profits by finding a new way within the blockchain transactions.
The MEV bots inspect the mempool and use sandwich, front-running, and arbitrage attacks to rearrange transactions into the block to maximize profits. In simple terms, the order flows in a blockchain are improved by creating the MEV trading bots. This platform operates within the decentralized finance (DeFi) ecosystem, utilizing blockchain techniques such as gas price bidding and transaction ordering.
The MEV bot development plays a major role in the DeFi ecosystem. As the decentralized finance ecosystem continues to evolve, MEV bots play an important role and have become a key factor in leveraging advanced algorithms to reshape the market and unlock emerging opportunities. In essence, this brings out the maximum value from blockchain transactions.
According to the statistics, the MEV bot has an impressive profit of $1.4 billion since 2023. And it is predicted to reach more than 2 billion by the end of this year. Moreover, this reach has been achieved by some MEV bots, such as Flashbots (15%) and the Eden network (65%), in the global market.
The MEV bots function by scanning the mempool, and it involves a series of combinations of real-time data analysis, strategic acquisition positioning, and gas fee management. However, here is a step-by-step procedure for the working process of the MEV bot.
A mempool serves as a temporary storage for saving remaining transactions. It actively tracks the transactions done in the mempool by having access to the mempool. They carefully analyze the transactions within multiple pools to find beneficial opportunities, ensuring they are identified before the transactions are confirmed on the blockchain.
Besides this, the bots conduct an in-depth evaluation of the pending transactions and identify the MEV opportunities using various strategies. These may primarily include gas fees, transaction types, and the processing time. Moreover, the bots examine the pending transactions in milliseconds, and they access several opportunities, including liquidation, arbitrage, huge trades, and other options.
The next step is to execute the MEV transaction. This procedure is followed by recognizing the profit opportunities. Here, an MEV trading bot mainly focuses on programs such as backrunning, frontrunning, liquidations, flash loans, arbitrage, and sandwiching, each concentrating on enhancing profits.
The MEV bot often increases its gas fees to make sure the transactions are done on time without any delay. Moreover, this secures the transaction in the next block, preventing the opportunity from declining and ensuring faster processing.
Flashbots, a specialized platform, offers advanced tools to submit the MEV bot transactions to the miners or validators directly. The Flashbots platform offers features such as algorithmic trading, smart contracts, and transaction monitoring to increase the efficiency of transactions.
Here is a guideline on how to create your own MEV bot in detail. Go through them and start developing yours to gain for yourself.
Begin the MEV development process by expertizing yourself in blockchain technology and smart contracts. It is also important to understand the market dynamics and the fundamentals of the mempool structure. Once done, research some of the popular MEV programs, including sandwich bots, arbitrage, liquidation, and front-running bots.
Now, based on your MEV support, pick a suitable blockchain network like Ethereum, Solana, BNB Chain, or Polygon. Here, each network comes with its own features, specifications, and compatibility. So, make sure to choose a wise one that lines up with your needs and then connect it with the mempool.
After selecting the blockchain, choose a specific MEV bot strategy that matches your outcomes. Then start designing the MEV bot’s infrastructure by outlining the parameters like transaction mode, mempool monitoring, and the blockchain technology interaction. Additionally, you can also prioritize parameters, including security, code audits, access controls, and more, to design the platform effortlessly.
Now, integrate and connect with a mempool to observe the transactions in real time. Then, make sure to identify the potential trends & formats in the market and fix the bugs or issues and minimize them effectively.
Then, submit the transaction bundles privately using Flashbots Protect and prevent it from frontrunning and bot competition. This process may take some time to build up the bundle. So, wait for some time and then submit the transactions via Flashbots to carry out the process smoothly.
Prioritizing the security checks is one of the core components of creating an MEV bot. So, use security experts and thoroughly implement secure coding practices like code audits and other measures from the beginning. Once done with the security checks, test the MEV bot in testnets to eliminate it from financial losses.
After the testing process is over, deploy your MEV bot on the chosen blockchain. Make sure to continue monitoring and tracking the bot’s conditions as the possible. Moreover, you can even steadily monitor the bot’s live performance and failure alerts by downloading the necessary systems.
Finally, track the market demand & fluctuations and be ready to customize your strategies according to the needs and trends. Trace the modifications that impact MEV and update the bot’s code as needed.
The bot comes in various types, and they undergo specific strategies to extract the maximum extractable value (MEV). Let’s delve into the section below to know the major types and strategies that are used to utilize the market's inabilities and transaction timings.
An arbitrage bot, also known as an arbitrage trading bot, is automated trading software that is designed to automatically capitalize on prices for the same assets across multiple decentralized exchanges (DEXs) or markets.
For instance, the arbitrage bot plays a crucial role in the market by continuously buying at lower prices and selling at higher prices with a greater profit and minimal risk.
As a result, crypto arbitrage trading bot development has gained strong momentum, helping businesses and traders harness these opportunities efficiently.
This process of maximizing profits through arbitrage MEV in the financial ecosystem has made it quite popular.
A liquidation trading MEV bot is used to detect lending platforms for undercollateralized loans and is well-versed in utilizing liquidation opportunities in the decentralized finance protocols.
Here, the MEV bot operates continuously to grasp the collateralized positions and starts the liquidations when the collateral value drops below the defined threshold.
By generating these liquidation processes, bots can get profitable opportunities, especially in marketplaces where liquidation events are taking place frequently.
Another type of MEV bot is the frontrunning bot, which capitalizes on placing transactions before others by gaining profit from its impact on the market price.
Typically, a frontrunning MEV bot is used in transactions and token launches, besides the need for high gas bidding.
However, these bots leverage price fluctuations and focus on high-value transactions, which results in significant profits.
A flash loan is a type of automated software that leverages MEV strategies and flash loans to utilize opportunities within the DeFi ecosystem.
These bots use flash loans, which are uncollateralized (borrowed loans), commonly used to pay back within the same transaction by minimizing the operation risk.
Using this loan, bots acquire large amounts of budget.
In a gas auction, the MEV bot competes with other gas transactions by bidding higher gas fees, ensuring its transactions are prioritized and included in the next block before others.
This automated program is often used in flashbots, private mempools, and block builder markets with high, secure, profitable placement.
The sniper bots are trading programs that are used to purchase the tokens from the blockchain platform automatically.
Using technical analysis and indicators, the sniper bot identifies optimal entry and snipes the valuable assets beforehand using smart contract interaction.
A sandwich MEV bot, also known as a sandwich attack bot, is well known for its layered approach, which operates on tokens by placing two transactions around a single target user’s trade.
The first transaction is called front-running, which creates a variable environment and profits the second transaction, called back-running. These two transactions combine to provide a lucrative opportunity.
Moreover, a sandwich MEV bot typically runs on a decentralized exchange (DEX) like Uniswap.
Below are some of the common sandwich bot strategies that you must consider while going through the MEV bot types.
Time Bandit Attack: Here, the attacker easily identifies and replaces the previously mined blocks that contain high-value MEV transactions. Henceforth, it is an enlightened version of the sandwich attack.
Liquidity Snipping: It refers to the monitoring of the blockchain mempool for liquidity and transactions when a new token is launched. Liquidity is directly provided to the decentralized exchanges (DEXs) in this context.
Pump and Dump Attack: This attack is known as a price manipulation strategy, which is often used on decentralized exchanges. Here, the orders are placed during price expansion, and the attackers gain maximum profit during market fluctuations.
MEV bots prioritize transactions strategically and gain profit that corresponds with their selected MEV program. Once a profitable opportunity is found, MEV prioritizes and functions to include its own transaction in the block before others are added. This, in turn, is achieved by offering higher gas fees, ensuring they are included in the block, which potentially gains a head start in the market.
The MEV bot continuously monitors and records the mempool, and the transactions are done within the blockchain network to find successful opportunities. It acts as a temporary storage to identify high-value transaction data before it is confirmed and acts preventively to perform programs like liquidation events, arbitrage, sandwiching, and frontrunning.
The MEV bots can identify and monitor loan positions on lending protocols and thus automate the liquidation processes. This, in turn, quickly liquidates undercollateralized positions and allows traders to take a portion of the liquidated asset at a reasonable price.
By leveraging flash loans, known as temporary loans, the MEV bot plays complex arbitrage strategies to perform large trades quickly and efficiently. This feature lets traders capitalize on opportunities and suggests refunding the borrowed loans within the same block.
The MEV bots ridiculously monitor and determine the gas prices by prioritizing their transactions. By adjusting the gas fee, the bots create a correct balance between profitability and unnecessary operational expenses and increase the overall profit margins.
To perform complex strategies and to interact with the decentralized finance protocols directly, the bots often use the custom smart contract feature. However, the MEV bot accesses variables such as token swaps and liquidity pools within the smart contracts and thus focuses on identifying the vulnerabilities.
The MEV bot helps to identify the price differences among different decentralized exchanges in an effective way. Moreover, the arbitrage trades are performed through flash loans to seize profits in a high-yield technique in real-time.
The MEV bots are crucial in adjusting the price across various decentralized finance (DeFi) platforms. They maintain a uniformity in asset prices by monitoring the price variations. MEV bots thus support transparent and equitable trading to prevent the rise and fall in price changes.
MEV bots provide instant liquidity for traders, enabling them to gain profits from arbitrage or liquidation that might be inaccessible. This enhancement particularly benefits the DeFi ecosystem, expanding the trading flexibility and financial possibilities.
A large number of MEV bots play a role in contributing to the stability of DeFi protocols by addressing the undercollateralized loans. These bots safeguard the protocol from troublesome situations and liquidate the risky protocols effectively. In essence, it enhances the trust in the system and increases the stability in decentralized finance (DeFi) applications.
The MEV bots are structured in blockchain networks, enabling users to generate substantial profits. They maintain their consistency in the volatile markets by automating strategies like front-running, arbitrage, and liquidations. This is the reason why most individual traders or organizations get into MEV bot.
The bots have developed into a trustworthy and long-lasting revenue-generating tool, which consistently identifies profitable transactions. This feature is especially advantageous during sudden market downturns or when a new token is launched in the market.
The automation system of the MEV bot reduces errors and ensures accurate and stable transactions. This system of reducing human error maximizes the value extraction of the MEV bot. The automated execution system leads to faster and more accurate trades, especially in dynamic markets.
The MEV bots are adjustable with multiple blockchain networks and allow users to explore and access the opportunities within the ecosystem. Thus, the multiple blockchain system expands the opportunities and benefits. Here, the popular blockchain networks include Ethereum, Solana, and Binance Smart Chain.
The bots can easily interact with dApps and DEXs to gain more opportunities for traders. Moreover, it engages with smart contracts & protocols and opens up new prospects for arbitrage and cross-platform trading.
By taking a thoughtful approach, BlockchainX is one of the top MEV bot development companies that has developers with real-world experience. We create MEV trading bots that amplify and change the performance of the crypto exchange development platform. With comprehensive knowledge and updated with the latest trends, our team of developers will understand your needs and will provide customized bots with unique features and enhanced security.
Whether it may be a sandwich bot, frontrunning, flash loan, or a liquidation bot, we bring a reliable bot with our experienced developers. So, without any delay, hire our development team and start your own crypto MEV bot to make a change in the ever-growing crypto market.
In conclusion, MEV bots create a breathtaking advancement in blockchain technology and the crypto ecosystem. If you are a businessperson or an individual who is interested in creating a new MEV bot, then there are a few factors that you have to understand beforehand. By having an extensive overview of the above guide, anyone can gain profitable knowledge about how to build your own MEV bot from scratch and can become an expert themselves in this extensive field.