What is ‘sandwich trading’ and how are bots making millions?

As such, this bot has been co-developed by quant analyst and hedge fund CEO Mortiz Seibert and statistician Moritz Heiden.

Bots mint money too

With time, the space has evolved and so have the bots evolved. Today’s bot generation is much more smart and sharp-witted. They’ve started using their skillset in a much more prolific way.

Interestingly, bots have been earning their own bread and butter by making millions of dollars in profit by using the “sandwich trading” technique.

The term, as such, refers to a process in which a bot is programmed by software devs to spot when another trader is attempting to purchase a crypto asset on a blockchain. The bot then places an order on the same token, with the intention of completing the transaction first and driving the asset’s price up. Then, the bot “completes the sandwich” by selling the token to the original trader at a higher price. 

Devs have flooded the Ethereum ecosystem with bots, who have been clocking up in profits at the expense of other traders. As per a recent Bloomberg report, the method has become so successful that bot deploying traders are finding it increasingly difficult to execute their own orders due to the sheer number of other bots attempting sandwich trading.

Highlighting a couple of recent instances where things got haphazard ob the Solana blockchain, Bloomberg’s report noted,

“As crypto prices cratered in recent weeks, so-called liquidation bots bogged down Solana, a blockchain favored by many finance pros, when they overloaded it by sending more than 2 million transactions a second. And back in September, Solana was taken completely offline for 17 hours by bot activity.”

After months of experiencing major congestion issues, Solana finally announced in January a series of developments meant to address the increase in bot traders, including implementing a series of “flow control” measures designed to enhance network performance and manage the influx of sandwich trading bots.

Sandwiches undoubtedly make you feel mouth-watery when you’re dead hungry but are one of the soberest food items as such. So, even though the whole sandwich trading aspect might seem to be glitzy from the outside, it shouldn’t be forgotten that the technique does possess the power to cause havoc and disrupt blockchain ecosystems.