The recently launched Zeromev by @pmcgoohanCrypto has shed light on the dark forest of #MEV.
#MEV had been harmful to us, crypto users. Here's what you need to know about the impact of MEV and how to avoid it.
A thread🧵
1/10
#MEV had been harmful to us, crypto users. Here's what you need to know about the impact of MEV and how to avoid it.
A thread🧵
1/10
https://twitter.com/pmcgoohanCrypto/status/1541788362931060739
Let's look into the most occurred MEV on Zeromev: Sandwich attack.
What happened here:
1. A victim's tx (swapping $ETH for $USDC) was sandwiched and received a worse swap rate
2. An attacker net a profit from frontrun (sell $ETH at high price) and backrun (buy $ETH at low)
2/10
What happened here:
1. A victim's tx (swapping $ETH for $USDC) was sandwiched and received a worse swap rate
2. An attacker net a profit from frontrun (sell $ETH at high price) and backrun (buy $ETH at low)
2/10
Let's dive into the txs details
1. Frontrun tx
An attacker
- sold 169.12 $ETH for 183,725 $USDC (avg sold price = 1,086.36)
- paid 0.008 $ETH as tx fee
Now, $ETH price decreased as there are more $ETH and less $USDC in the pool.
3/10
1. Frontrun tx
An attacker
- sold 169.12 $ETH for 183,725 $USDC (avg sold price = 1,086.36)
- paid 0.008 $ETH as tx fee
Now, $ETH price decreased as there are more $ETH and less $USDC in the pool.
3/10
2. Sandwich tx
The victim
- sold 450 $ETH for 487,972 $USDC
The tx further decreased $ETH price.
4/10
The victim
- sold 450 $ETH for 487,972 $USDC
The tx further decreased $ETH price.
4/10
3. Backrun tx
An attacker
- bought 169.4 $ETH using 183,725 $USDC gained from the frontrun tx (avg bought price = 1,084.56)
- paid 0.27 $ETH as tx fee
5/10
An attacker
- bought 169.4 $ETH using 183,725 $USDC gained from the frontrun tx (avg bought price = 1,084.56)
- paid 0.27 $ETH as tx fee
5/10
From frontrun and backrun tx, the attacker
- net 0.002 $ETH free money (mostly the earning is paid to miner for Gas Price Auction)
6/10
- net 0.002 $ETH free money (mostly the earning is paid to miner for Gas Price Auction)
6/10
But how much did the victim lose?
If there was no frontrun and backrun, the victim would get 488,749 $USDC from selling 450 $ETH, an extra 777 $USDC!
7/10
If there was no frontrun and backrun, the victim would get 488,749 $USDC from selling 450 $ETH, an extra 777 $USDC!
7/10
So why did this occur?
The victim allowed some price slippage when using the swap router.
Low price slippage: before your tx gets executed, the price may alr move, so your tx will be rejected.
High slippage: you accept a worse swap price and are prone to sandwich attack.
8/10
The victim allowed some price slippage when using the swap router.
Low price slippage: before your tx gets executed, the price may alr move, so your tx will be rejected.
High slippage: you accept a worse swap price and are prone to sandwich attack.
8/10
How can you avoid MEV?
One solution provided by Zeromev is to use Layer 2 chains with first come first serve (FCFS) implemented e.g. @arbitrum. FCFS ensures your txs are executed in order of arrival time. No more frontrun.
9/10
One solution provided by Zeromev is to use Layer 2 chains with first come first serve (FCFS) implemented e.g. @arbitrum. FCFS ensures your txs are executed in order of arrival time. No more frontrun.
9/10
If you find the thread helpful, Like, Retweet, and Follow me @0xSh1r0 for more threads like this.
10/10
10/10
https://twitter.com/0xSh1r0/status/1542389957066915840?s=20&t=DQ3aRKjMRZm0xJQkBssTsg
Also, like this tweet if you want to know how to calculate the victim's loss.
https://twitter.com/0xSh1r0/status/1542389982295642112?s=20&t=DQ3aRKjMRZm0xJQkBssTsg
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