Forward the Original Title: Web3 Beginner Series: Understand MEV Bots in Five Minutes, You Can Write Too

Against the backdrop of the increasing popularity of blockchain technology, the cryptocurrency trading ecosystem is rapidly expanding. Decentralized exchanges (DEXs), with their advantages of decentralization and transparency, have become crucial platforms for digital asset trading. As the market matures, various automated trading tools have emerged.

MEV (Maximum Extractable Value) bots are automated programs used to execute strategies on blockchain networks. They extract maximum value by reordering, inserting, or delaying blockchain transactions. This article delves into the definition, principles, implementation methods, determining factors, and optimization directions of clipper bots.

As technology and market demands progress, clip bots have also evolved into various types to suit different trading environments and strategies. Below are some common types of clip bots:

1. Sandwich Clipper Bots

These bots monitor large orders in the transaction pool and submit transactions with higher gas fees before these orders are confirmed on-chain. This allows them to complete transactions ahead of users. This strategy involves inserting transactions before and after the target transaction (front-running and back-running) to manipulate prices for profit.

1. Arbitrage Clipper Bots

These bots focus on leveraging price differences between DEXs to profit. They buy low-priced assets on one exchange and sell them at a higher price on another. This strategy requires bots to quickly identify price changes between exchanges and execute transactions promptly.

1. New Token Launch Bots

These bots capitalize on price fluctuations during new token launches. Prices are often unstable during the initial stages of a token’s listing on a DEX. The bots swiftly buy tokens at launch and sell them after price increases to capture the spread.

1. Liquidity Pool Arbitrage Bots

These bots arbitrage by transferring assets between different liquidity pools. They search for price discrepancies between pools and perform liquidity provision and withdrawal operations to profit.

1. Flash Loan Arbitrage Bots

These bots utilize the characteristics of flash loans to trade. Flash loans allow users to borrow large amounts without collateral in a single transaction. The bots manipulate market prices in the short term to achieve arbitrage profits.

1. Triangular Arbitrage Bots

Triangular arbitrage involves trading among three different token pairs to leverage exchange rate differences for profit.

Focus of This Article: Sandwich Clipper Bots

I. Sandwich Clipper Bots

Sandwich clipper bots are automated trading tools designed to generate profits by front-running transactions in decentralized exchanges. They quickly capture on-chain trading opportunities by executing trades either before or after target transactions to earn price differences. The core of sandwich clipper bots lies in their high efficiency and speed in seizing trading opportunities.

II. Principles of Sandwich Clipper Bots

The profit-making operation of sandwich clipper bots is based on the following principles:

1. Front-running: Before other users’ buy orders are included in a block by miners, the bot purchases target tokens at a lower price. Once the user’s order is executed and pushes the price higher, the bot sells quickly to capture the price difference.

2. Back-running: Before other users sell their tokens, the bot sells at a higher price. After the user’s sell order drives the price lower, the bot buys back at a lower price to generate profits.

The term “clipper” refers to clipping user transactions to earn the price difference. The success of clipper bots depends on precise timing and high-priority trade execution.

III. Implementation Approach

1. Real-time Transaction Monitoring:

• Use WebSocket to connect to blockchain nodes and monitor pending transactions in real-time.
• Filter target transactions by matching the transaction.to or transaction.from fields to identify those related to the target DEX.

1. Filtering and Screening:

• Exclude transactions unrelated to the strategy and transactions from the bot’s own address to prevent self-trading loops.

1. Dynamic Gas Price Adjustment:

• Manually set higher gas prices to ensure miners prioritize the bot’s transactions over regular users.

1. Decoding Transaction Data:

• Use smart contract interfaces (e.g., Interface in ethers.js) to decode transaction data and determine the tokens and amounts involved.
• Based on the decoded information, choose the appropriate contract call methods, such as swapExactETHForTokens or swapTokensForExactTokens.

IV. Code Implementation

Using ZAN’s WebSocket service, you can follow this documentation for a complete tutorial (https://docs.zan.top/docs/quick-start-guide). The script utilizes ethers.js for its implementation.

1. Create a WebSocket Listener Service:

const ZAN_WSS_URL = wss://api.zan.top/node/ws/v1/eth/mainnet/${YOUR_KEY}

const ZANWssProvider = new ethers.providers.WebSocketProvider(ZAN_WSS_URL);

ZANWssProvider.on(“pending”, (tx) => {

// TODO

});

1. Filter Transactions:

ZANWssProvider.on(“pending”, (tx) => {

if (transaction && transaction.to && transaction.to.toLowerCase() === ROUTER.toLowerCase() && transaction.from !== blackAddress) {

// TODO

}

});

1. Determine Transaction Direction and Set Gas Price:

function calculate_gas_price(action, amount) {

if (action === “buy”) {

return amount.add(100000000) // 0.1 Gwei

} else {

return amount.sub(100000000) // 0.1 Gwei

}

}

1. Decode Transaction Data and Call Functions:

const iface = new ethers.utils.Interface(abi);

const result = iface.decodeFunctionData(‘swapExactETHForTokens’, transaction.data);

V. Determining Factors

The effectiveness and success of clipper bots depend on several factors:

1. Transaction Speed:

Network latency and node response speed directly impact the bot’s reaction time. Using high-performance node services like ZAN, Infura, or Alchemy can reduce latency, with ZAN offering support for independent nodes.

1. Gas Fees:

Gas fees are a critical consideration when prioritizing transactions. Excessively high gas fees can erode profits, requiring a balance between speed and cost.

1. Market Liquidity:

High liquidity facilitates the rapid execution of large trades without significantly impacting market prices. Insufficient liquidity may lead to increased slippage or transaction failure.

1. Contract Security:

The security of the target contract is directly related to the operational risk of the strategy. Bots should have basic validation capabilities for contract codes to avoid exploitation by malicious contracts. ZAN’s contract auditing capabilities can help mitigate risks (https://zan.top/home/ai-scan).

1. Competitive Environment:

Multiple clipper bots may compete for profit opportunities in the market. Intense competition can affect trade success rates and profitability.

Conclusion

MEV bots provide an efficient solution for arbitrage in decentralized exchanges. By analyzing in real-time and executing transactions quickly, they gain a competitive edge in the market. However, clipper bots also face challenges such as intense competition and high risks. Investors must comprehensively evaluate technical implementation, risk control, and market strategies to remain competitive in the ever-changing cryptocurrency market. In the future, as technology advances and the DeFi ecosystem expands, clipper bots are expected to unleash their potential in more areas, creating more value for users.

This article was written by KenLee from the ZAN Team (X account @zan_team). The content is for technical sharing purposes only and does not constitute investment advice.

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