MEV bot suffers $3 million loss amid mispriced token swaps

An MEV bot lost more than $3 million in ether from multiple token swaps that went wrong, leading to massive gains for other bots that seemed to have targeted the victim, as well as a 691.9 ETH ($1 million) block-building reward for Lido Finance.

The initial bot, referred to here as the victim for clarity’s sake, initiated several transactions that were presumably high-value token swaps within the same transaction block. These transactions were supposed to take advantage of other trades, according to Flashbots Product Lead Robert Miller, in order to extract MEV. But they ended up mis-priced as other bots upset its strategy.

One such transaction involved the victim swapping $1 million USDT for just $325 of wabi tokens. 

Another MEV bot ended up scooping 375 ETH ($637,000) while paying 150 ETH ($255,000) to the block builder thus securing a profit of 225 ETH ($382,000), according to Miller.

MEV stands for maximal extractable value. It is a fee earned by network validators in exchange for priority ordering — where users pay a premium to ensure that their transactions are confirmed before others on the chain. Such users run MEV bots, designed to seek out and execute high-value arbitrage swaps, while paying huge fees to validators to get there first.

On-chain data also shows other trades by the victim in the same block being taken advantage of by MEV bots. In one instance, an MEV bot made a profit of 370 ETH ($629,000).

Miller contended that the victim might have a bug in its code. This could be the reason for the bad swaps that led to significant losses on its part. The victim’s contract address still has $7 million worth of assets at the time of reporting.

MEV arbitrage bots were not the only ones to profit from the victim’s bad trades today. Lido Finance’s block builder also scooped a 691.9 ETH ($1 million) reward. This was for ordering transactions on behalf of the MEV bots that were making the profitable trades.