Risks of Decentralized Exchanges — Clip Bot

Hi, I am ??, this is the popular science branch of the #区块链发展史 series. The content of this issue is: Clip Robot!

Friends who often beat dogs on chains must have encountered a clip robot, right? We obviously waited for a good time to buy at a low price, but someone bought it first and raised the price. Let us take the order and sell it immediately, right?

Before reading: The content of ?? is step-by-step. For prerequisite knowledge, you can check historical articles. If you have any questions, you can read it by yourself! ️

The clip robot in the decentralized exchange, also known as the front-running robot, MEV robot, is an automated trading strategy!

It uses price differences for arbitrage by placing orders between buy and sell orders. The principle of the Clip Robot is to detect slippage profits by detecting trading pairs. When a large transaction is detected, the clip robot will automatically use the higher GasFee to pre-empt the purchase order, and then use the slippage to sell to the trader at a higher price to earn the price difference.

How to avoid being arbitraged by bots:

• Use aggregators like 1inch, Matcha, etc. that can help you find the best trading prices and liquidity across multiple exchanges and DeFi protocols.

• Use Flashbots, a solution that blocks front-running attacks through private transaction pools and auction mechanisms, which allows your transactions to communicate directly with miners or validators, avoiding retrieval by clip bots in the public mempool.

• Use limit orders instead of market orders to set a maximum or minimum price you are willing to accept to avoid paying exorbitant transaction fees due to slippage.

• Avoid low liquidity pools as they are more vulnerable to bot attacks.

• Set low slippage to reduce the deviation of expected returns.

• Use privacy protection techniques during transactions, such as zero-knowledge proofs, to hide transaction details until the transaction is confirmed

• Use timelocks or commit-reveal schemes to prevent bots from reacting to pending transactions.

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