Report: Crypto Trading Bots Are Making Billions of Dollars by ‘Sandwich Trading’
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Crypto trading bots are reportedly making hundreds of millions of dollars — if not billions — in profit by implementing a technique known in the industry as “sandwich trading.”
According to a recent report by Fortune citing data from Bloomberg, bots are using “sandwich trading” to rake in massive amounts of profit across the Ethereum ecosystem.
The term refers to a process in which a bot is programmed by software developers to spot when another trader is attempting to purchase a cryptoasset on a blockchain, such as Ethereum or Cardano. The bot places an order on the same token, with the hopes of completing the transaction first and driving the asset’s price up. The bot then “completes the sandwich” by selling the token to the original trader at a higher price tag.
The report claims developers have flooded the Ethereum ecosystem with bots, racking up an untold fortune in profits at the expense of other traders. According to Bloomberg, the method has become so successful that developers are finding it increasingly difficult to execute due the sheer number of other bots attempting “sandwich trading.”
The end result has been a fanning out of “sandwich trading” bots to other blockchains, notably Solana, Polygon and Avalanche. The bots have created a sudden and exponential increase in traffic for these altcoins, straining their networks and causing congestion.
The reports notes that in January Solana was forced to implement new developments to address the bot traders, including “flow control” measures.
Disclaimer
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
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