Bots Overrun and Make Millions of Dollars on Smart Contract Networks
Despite the current bearish trend, there are still reasons to be moderately bullish for the next few months. Even though cryptocurrency prices have fallen, the returns have remained amazing. Bots have largely taken over the market for Ethereum-based digital tokens, thanks to sophisticated trading strategies like “sandwich trading.”
Crypto Bots make millions for investors
Hundreds of millions, if not billions of dollars in trading profits, have been snatched up by crypto trading bots over the years. Enslaved in the pursuit of profit, they’ve made rivals by front-running others’ transactions, which blockchain-fueled trading makes possible.
Cryptocurrency trading bots automate the buying and selling of cryptocurrencies at the ideal moment. The primary objective of this software is to increase income and minimize losses and dangers. These programs allow you to handle all of your crypto exchange accounts from a single point.
Bots have also aided the crypto market as a whole: By imitating old-school arbitrageurs, bots have made the Ethereum ecosystem more efficient, eliminating price gaps by buying lower and selling higher over and over. It’s gotten to the point that bot-deploying traders have a harder time making money on their original territory in Ethereum.
Bots are migrating elsewhere due to this, wreaking havoc on new blockchains in the process. They’ve overrun market infrastructure that wasn’t built to handle such a rapid trading rate.
In recent weeks, the cryptocurrency market has been in a slump. However, Solana, a blockchain preferred by many financial experts, was clogged by so-called liquidation bots. The Solana platform provides an alternative to Ethereum. Since January 2021, its price has increased by more than 6,000 percent.
The Solana system was overwhelmed by bots that sent more than 2 million transactions per second. In addition, Solana was taken offline for 17 hours in September last year due to bot activity.
Crypto Bots overrun networks
Solana is by no means alone in seeing an increase in computerized trading bots. Like Polygon, Avalanche, and Binance Smart Chain, other exchanges are also being clogged. According to Flashbots, over 25% of MEV takes place on blockchains other than Ethereum.
Ethereum’s price has boomed over the last years, and its market capitalization is now more than $367 billion. This is no surprise, considering that automated traders helped make Ethereum the second-largest cryptocurrency. This is a sign that decentralized finance (DeFi) is expanding outside of just that area, bringing the bots with it.
However, the difficulties that the bots have created indicate that the industry has a long way to go before its underlying infrastructure meets the demands of experts. With the release of ETH 2.0, Ethereum’s network infrastructure can now effectively manage all of the bot trading volumes. The DeFi movement, on the other hand, is expanding to other blockchains, and they aren’t keeping up nearly as well.
In January, a bot on blockchain Polygon PoS made approximately 1.5 million transactions to create pickaxes in the crop-planting game Sunflower Farmers. The bot’s activity ultimately led to the game’s closure and boosted transaction costs on Polygon to ten cents from a single penny.
Long-time bot operators are simply hedging their bets, especially as Ethereum is set to have a significant technical upgrade this year. The very backbone of Ethereum is being revised, which some bot owners believe may harm their operations. If they don’t get it right, they risk losing a significant amount of the DeFi market to other chains prioritizing user experience over decentralization.
