In the blockchain world, on-chain transactions have become an essential part of cryptocurrency investors' daily operations. However, with the rise of DEX (Decentralized Exchanges), special arbitrage bots have emerged, with sandwich bots being the most typical. These bots profit by sandwiching user transactions, causing significant losses to ordinary investors.
What are Sandwich Bots๏ผ
A sandwich bot is a specialized automated arbitrage program whose core principle is to monitor pending transactions in the Mempool. Upon detecting a target transaction, it inserts transactions before and after it, profiting from the price slippage of the target transaction. This operation method is likened to "adding bread before and after" the target transaction, hence the name "sandwich attack." Sandwich bots continuously scan pending transactions in the mempool, quickly calculate the potential price impact of target transactions, then buy tokens before the target transaction and immediately sell afterward to capture the price difference.
MEV (Maximum Extractable Value) refers to the maximum value that miners or validators can extract by reordering, inserting, or censoring transactions within blocks. Sandwich bots are a concrete manifestation of MEV. In the Ethereum network, MEV has become a significant issue, with annual losses due to MEV estimated at hundreds of millions of dollars. This not only causes traders to bear higher slippage costs but also leads to network congestion, resulting in increased gas fees and ultimately undermining market fairness and efficiency.
To protect against sandwich bot attacks, investors can adopt various defensive measures. First, they can choose DEX platforms that support private transactions, submitting transactions through special channels to avoid public mempool scanning. Second, they should set reasonable slippage tolerance and preferably use limit orders rather than market orders. In terms of timing, investors should avoid large transactions during periods of high market volatility and consider splitting large trades into smaller ones. Additionally, using exchanges with anti-bot mechanisms and trading pairs with sufficient liquidity is a wise choice.
As blockchain technology evolves, countermeasures against sandwich bots continue to advance. Emerging solutions include off-chain order books, zero-knowledge proof technology, and batch auction mechanisms. Off-chain order books reduce the chance of bot monitoring by moving the order matching process off-chain. Zero-knowledge proof technology protects transaction privacy, preventing transaction information from being obtained in advance. Batch auction mechanisms effectively reduce the risk of individual transactions being attacked by bundling multiple transactions into the same block.
Conclusion
Sandwich bots represent a significant risk factor in current cryptocurrency trading. As investors, understanding their operating mechanisms and prevention measures is crucial. While completely avoiding sandwich attacks remains challenging, we can minimize loss risks through appropriate protective measures. With technological advancement and market maturation, more effective solutions will emerge, providing users with a safer trading environment. When investing in cryptocurrencies, maintaining vigilance and taking necessary precautions not only protects our assets but also promotes the healthy development of the entire cryptocurrency market.
