10 ms·

On the ETH chain, Flashbots [1] has decimated profits, by turning MEV into a race to the bottom, where miners wind up with most of the profits that bots ("searc

On the ETH chain, Flashbots [1] has decimated profits, by turning MEV into a race to the bottom, where miners wind up with most of the profits that bots ("searchers") create. On other chains there is much more profit to be had. People are making large amounts of money, as you can see here [2] (check out BSC on there, most of those profits go to the actual bot owners). It's gotten incredibly competitive, and there has been quite a bit of consolidation. You used to be able to make a bot that could just make a few thousand dollars per day. Now you're either making 6 figures per day as part of a team, or a few hundred dollars per day on your own. One of the reasons you need a team and financing is that much of it is infrastructure based - being right next to miners/validators in the same server rack, etc. It takes significant resources to have nodes exactly where you need to have them, in various parts of the world. It's also feast or famine. Sometimes, you'll wake up with hundreds of thousands of dollars from thin air. Here [3] is a loan liquidation using a flash loan from last week that netted the person that submitted it $366K (that was the value at the time) - in a few milliseconds. The only money they had to have to do this tx was the $1.50 transaction fee. The ~$8 million necessary for the liquidation was flash borrowed from a Pancakeswap pair. [1] https://docs.flashbots.net/ https://docs.flashbots.net/ [2] https://eigenphi.io/ https://eigenphi.io/ [3] https://bscscan.com/tx/0x73d37b728ebd55088d0d7ccd3f82a485ac31035a957ba0ad9f2258ef556e62c1 https://bscscan.com/tx/0x73d37b728ebd55088d0d7ccd3f82a485ac3...

ge96 4y ago
Everytime I read these seems too good to be true. $1.50 -> $366K? Who doesn't want that.
- downandout 4y ago
  It is and it isn't. Getting to the point where you were the one bot fast enough to get into the right position to snag that liquidation involves writing the bot itself, writing the smart contract, understanding the lending protocol and how their liquidations work, understanding how oracle transactions work, working out the math such that every input and output is precisely correct to 18 decimal places, having your server in the right rack in the right datacenter to beat the others, and on and on, are not easy tasks. But yes, once you do all of that...it actually is a money printing machine that will never end as long as markets have volatility. It's a bit like living in the movie Ready Player One...once you are clever enough to run the gauntlet, riches are yours.
  - ge96 4y ago
    > precisely correct to 18 decimal places Yeah this is tough. Even just dealing with CBP (8 decimals) I was losing fractions of cents here and there, not sure how they get it right, sometimes seems like randomly round to come out even (cases like emptying ballance).
  - wildmanx 4y ago
    > But yes, once you do all of that...it actually is a money printing machine that will never end as long as markets have volatility. And despite this being inherent in the DeFi world, people still believe that such systems are better than fiat money?
    - downandout 4y ago
      They are in the sense that they level the playing field. People wouldn't give me millions of dollars to do arbitrage in real life, but I can borrow $200 million from a smart contract without issues if I find a profitable opportunity with it. That is game changing. That said, there are still challenges. Last week, for 6 hours, there was $1 billion up for grabs [1]. Nobody noticed it except for one person, who only took $13.5 million. But bots are coming that will spot these things instantly....I have one under development that would have caught it. [1] https://twitter.com/0xngmi/status/1524891992429318144?s=20&t=SiFfBpb2P0AfH5SyR2bGHQ https://twitter.com/0xngmi/status/1524891992429318144?s=20&t...
      - quanto 4y ago
        On a tangent, what distinguishes a successful bot from a poor bot? For many of the arbs, the logic is simple to imitate. I understand there is some infrastructure engineering (having servers close to some node) involved, but besides that, it seems a level field in terms of money and tech.
  - MomoXenosaga 4y ago
    Lol that's like saying anyone could be a moviestar if they had the looks and talents of a moviestar.
srmarm 4y ago
I don't know much about this at all so apologies if this is a stupid question, but presumably the owner of that $8m was compensated out of the profit of the deal and the $366k is what is left over for the person who set this deal up. If so that was a great deal and worked out, but if the deal hadn't worked out for whatever reason, a bug in the code for the bot etc what would the downside be and how would it be enforced?
- downandout 4y ago
  The owner of the $8 million was a smart contract, in this case a DEX (decentralized exchange) pair on Pancakeswap. Yes, the contract is designed to do this. I believe the fee on that pair is 0.25%. Technically this was a “flash swap,” not a flash loan, but they are functionally equivalent for purposes of this discussion. If the contract loans the tokens and isn’t paid back by the end of the transaction, it reverts as if nothing ever happened. Ethereum transactions are “atomic” - either all parts of the tx succeed, or they all fail. So there is no risk to the lender, they always get paid back.
  - srmarm 4y ago
    Ah OK that makes sense, thanks for taking the time to explain!

ge96 4y ago

Everytime I read these seems too good to be true. $1.50 -> $366K? Who doesn't want that.

downandout 4y ago
It is and it isn't. Getting to the point where you were the one bot fast enough to get into the right position to snag that liquidation involves writing the bot itself, writing the smart contract, understanding the lending protocol and how their liquidations work, understanding how oracle transactions work, working out the math such that every input and output is precisely correct to 18 decimal places, having your server in the right rack in the right datacenter to beat the others, and on and on, are not easy tasks. But yes, once you do all of that...it actually is a money printing machine that will never end as long as markets have volatility. It's a bit like living in the movie Ready Player One...once you are clever enough to run the gauntlet, riches are yours.
- ge96 4y ago
  > precisely correct to 18 decimal places Yeah this is tough. Even just dealing with CBP (8 decimals) I was losing fractions of cents here and there, not sure how they get it right, sometimes seems like randomly round to come out even (cases like emptying ballance).
- wildmanx 4y ago
  > But yes, once you do all of that...it actually is a money printing machine that will never end as long as markets have volatility. And despite this being inherent in the DeFi world, people still believe that such systems are better than fiat money?
  - downandout 4y ago
    They are in the sense that they level the playing field. People wouldn't give me millions of dollars to do arbitrage in real life, but I can borrow $200 million from a smart contract without issues if I find a profitable opportunity with it. That is game changing. That said, there are still challenges. Last week, for 6 hours, there was $1 billion up for grabs [1]. Nobody noticed it except for one person, who only took $13.5 million. But bots are coming that will spot these things instantly....I have one under development that would have caught it. [1] https://twitter.com/0xngmi/status/1524891992429318144?s=20&t=SiFfBpb2P0AfH5SyR2bGHQ https://twitter.com/0xngmi/status/1524891992429318144?s=20&t...
    - quanto 4y ago
      On a tangent, what distinguishes a successful bot from a poor bot? For many of the arbs, the logic is simple to imitate. I understand there is some infrastructure engineering (having servers close to some node) involved, but besides that, it seems a level field in terms of money and tech.
- MomoXenosaga 4y ago
  Lol that's like saying anyone could be a moviestar if they had the looks and talents of a moviestar.

srmarm 4y ago

I don't know much about this at all so apologies if this is a stupid question, but presumably the owner of that $8m was compensated out of the profit of the deal and the $366k is what is left over for the person who set this deal up. If so that was a great deal and worked out, but if the deal hadn't worked out for whatever reason, a bug in the code for the bot etc what would the downside be and how would it be enforced?

downandout 4y ago
The owner of the $8 million was a smart contract, in this case a DEX (decentralized exchange) pair on Pancakeswap. Yes, the contract is designed to do this. I believe the fee on that pair is 0.25%. Technically this was a “flash swap,” not a flash loan, but they are functionally equivalent for purposes of this discussion. If the contract loans the tokens and isn’t paid back by the end of the transaction, it reverts as if nothing ever happened. Ethereum transactions are “atomic” - either all parts of the tx succeed, or they all fail. So there is no risk to the lender, they always get paid back.
- srmarm 4y ago
  Ah OK that makes sense, thanks for taking the time to explain!