Solana-based MEV bot nets $1.7M profit in questionable trade

A Solana-based maximum extractable value (MEV) bot recently made headlines by raking a staggering $1.7 million from a questionable trade. The trade-in question involved a trader purchasing a substantial amount of the memecoin Dogwifhat (WIF) in what was deemed the “most inefficient way possible.”

MEV bots, automated programs that scan blockchain networks for profitable trading opportunities, have become increasingly prevalent in crypto. This particular bot, managed by an entity known as 2fast, executed a series of transactions that resulted in a substantial profit.

In this eyebrow-raising trade, the MEV bot initiated its operations by swapping 703 Solana (SOL) tokens into a staggering 490,000 WIF tokens within the same transaction bundle. But the real kicker was what followed next; it swiftly exchanged that same pile of WIF tokens for 19,035 SOL tokens. The result was a jaw-dropping profit of $1.73 million, as per data obtained from Solscan.

This remarkable feat was made possible through a tool developed by Jito Labs, the development arm of the Solana liquid staking protocol Jito. Comparable to the flashbots concept on the Ethereum network, this tool empowers bots to search for maximum extractable value and strategically place bids for inclusion in transaction bundles.

The catalyst: A questionable trade

The astonishing profit was catalyzed by a high-value trade executed by a zeroxtrading.sol, who purchased a whopping $8.9 million WIF tokens in a single order. 

However, the trade occurred in a low-liquidity pool, filling the order at a staggering rate of roughly $3 per WIF token – approximately 1,400% higher than the token’s market value. Regrettably for the trader, the immediate aftermath of this trade witnessed a staggering 92% loss of their funds.

The bot’s strategy

Pseudonymous developer Pland shed light on the MEV bot’s strategy in a recent post. The bot employed a relatively “simple” backrunning strategy, aiming to capitalize on the trader’s inefficient execution of the WIF order. 

Unlike more harmful tactics like “sandwich” attacks, backrunning primarily targets arbitrage opportunities created by a substantial mispriced trade without directly affecting the initial trade’s outcome.

Following this extraordinary trade, the price of WIF tokens briefly surged to as high as $4. Although the trader incurred significant losses due to their misplaced order, the sudden price increase prompted speculative traders, known as degens, to acquire WIF tokens again. Consequently, the memecoin experienced a 50% gain from the point immediately following the price drop.