Inside MEV: A Deep Dive into Maximal Extractable Value in the Crypto Universe

Inside MEV: A Deep Dive into Maximal Extractable Value in the Crypto Universe

hello Josh here welcome to a new video
where you will learn how me Bots work
many people know about me Bots but they
don’t know what’s so special about them
there are Bots making millions of
dollars a month a year in profit without
any work they just set it up code those
things and they let them run for profits
and in today’s video I’m going to show
you the three main types of me Bots and
how they work so you so that you can
understand better the technology behind
all of this exciting industry and how to
create maybe your own bots in an article
here and we will go through it and I
will show you the different types so
here’s lip meev it’s a page that shows
you the profit that meev Bots are making
and it’s very accurate According to some
sources and you can see here mainly
there are three main me boats their
Arbitrage sandwich and liquidation those
are the three types the first one is
arbitrage it’s the most common one and
as you can see here it’s very simple you
buy at One exchange like Unis Swap and
you sell at another exchange like sushi
Swap and you make a profit let’s say the
token ABC it’s on Unis Swap and you can
get 100 tokens for one ether and on
Sushi swap you can get 90 tokens for one
ether meaning on Sushi swap it’s more
expensive so if you buy on Unis swap you
get 100 tokens for one ether then you
sell it on Sushi swap you get 1.5 or
whatever ether so you made a profit of
005 and I mean it’s pretty simple right
so that’s how you do Arbitrage you find
different exchanges and you simply
Arbitrage the same token on different
places you buy at one place and you sell
at another now Arbitrage Bots are very
competitive they are the ones making the
most money and there are many different
variations you can go through multiple
different types one of them is buying at
one place selling at another getting a
middle token and that token swapping
back it’s it’s a lot of different things
that you can do but at the end you make
a decent profit and it’s the first type
of Bot for this you don’t need any fancy
knooow you don’t need flash Bots or
anything else because you can execute
everything in one
transaction what you need to do is you
need to write a smart contract that
allows you to buy and sell at the same
time because you don’t want to allow
time to affect your
profitability now there is is sandwich
Bots this is the one that I prefer I’ve
been working on this for months and
years and it’s one where you buy a token
then someone else buys that same token
and you sell the token this is much more
complicated that than Arbitrage because
you need to be watching transactions you
need to detect someone buying a token
and you use slippage to extract a profit
so let’s say John like here wants to buy
100 tokens ABC for one ether there there
is something called slippage which means
that he is okay he accepts the fact that
price may move and may increase in price
during the time that the transaction is
processing so he allows a slippage of 5%
or he is okay with receiving 95 ABC
tokens if he receives less than that the
transaction drops he doesn’t swap the
tokens because it’s less than what he
wants to get and let me repeat that when
you swap a token there is some time
until it is added to the blockchain
there’s some time that passes and during
that time someone else may come before
you this is because ethereum is open and
there are a few seconds between
transaction so when someone comes before
you when someone buys before you the
price increases and you get less tokens
that’s
slippage so the sandwich bot is all
about slippage it buys before first it
detects a buyer detect someone buying
let’s say Jon wants to buy 100 ABC
tokens for one ether the bot then buys
before Jon the same token whatever
amount is needed to move the price so
that Jon gets the minimum amount he is
willing to accept the slippage so the
bot buys before Jon and then the bot
sells the same tokens for a profit in
ether that’s how it works bot buys the
price of Jon is affected he gets less
tokens because the price has been
increased there is more demand for the
token and the bot sells all the tokens
that the bot received and this is is
pretty simple to understand but when it
comes to implementation you need to
understand how to use bundles how to
send private transactions with flash
Bots how to execute this in a timely
fashion because if you spend more than
one or two seconds executing all of this
functionality Jon’s transaction will be
accepted and you will miss the
opportunity sandwiching is one of the
most competitive fields in me because
there’s famous actors like Jared where
they have fine tune their Bots to the
point of an extreme level where they
extract the most profit and they well at
the end of the day whoever makes the
most profit is the one that takes that
opportunity because let’s say there is
five people five of them see the same
opportunity for buying and selling only
one of them can be accepted because
Jon’s transaction cannot be repeated
multiple times only once so the one that
captures the most profit one that is
more precise or faster or creates more
profit for validators or minor then
that’s the one that will take the
opportunity so this is how it works and
for this to work you need to have me
bundles that come from flash Bots that
way you can make private transaction I
could go on forever on how this works
and there are so many different things
but that’s the basic idea then there’s
the liquidation Bots this one is less
popular not many people are executing
liquidation Bots but the functionality
is is the following JN takes a loan for
1,000 tether locking $2,000 worth worth
of ether collateral as you know with the
crypto loan you need to to put some
collateral deposit some crypto so that
you can borrow all crypto and the value
of that deposit the collateral needs to
be higher than what you borrow that’s
the the guarantee your collateral is
guaranteeing your loan it’s making sure
that if you leave or you don’t pay the
loan the collateral is sold and we are
able to recover the profits so let’s say
the loan expires Jon doesn’t pay the
loan for a year or so the loan is bad is
no longer valid so a bot liquidation bot
sees that it’s expired and since these
lending protocols like compound are open
source they allow anybody to execute
this type of functionality they simply
execute the function they close the loan
they pay the debt for whoever got the
loan and uh keep some of the profits
that’s how it works the bot goes through
loans he checks that they are good or
bad and the bad ones he closes them
because he is able to do that and gets
some of the profit from the loan and the
profit comes from the
collateral I know it sounds confusing if
you’re not familiar with lending
protocols I encourage you to take a look
at them there are many of them most
popular ones are aav and compound
Finance but it’s a it’s a very
straightforward functionality and not
many people people are doing it if you
want more informative videos on how to
run an me bot yourself keep a watch on
my channel I will help you make passive
income and keep you updated with the
latest tech thanks for watching please
do subscribe the channel if you like the
content

A simple tutorial on the 3 major MEV systems so you can begin this exciting journey towards having an automated program that does all the work for you while generating almost passive income. These are not trading bots, they execute strategies with no loss.

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