Sniper bots are a type of malicious software that can exploit the decentralized nature of blockchain and cryptocurrency transactions. They are designed to monitor and trade liquidity pairs on decentralized exchanges (DEXes) and take advantage of new token launches, price fluctuations, and arbitrage opportunities. Sniper bots can harm both token developers and investors by manipulating the market, stealing liquidity, and causing losses. In this article, we will explain what sniper bots are, how Sniper bots pose a risk to your Blockchain investments, and how to stop them from ruining your token launch or investment.
What are Sniper Bots?
Sniper bots are automated programs that can execute trades faster and more efficiently than human traders. They can scan the blockchain for new transactions, analyze the data, and place orders in a matter of seconds or even milliseconds. Sniper bots can also use multiple accounts, proxies, and VPNs to hide their identity and activity.
Sniper bots are not inherently bad. They can be used for legitimate purposes, such as market making, arbitrage, and scalping. However, some sniper bots are built to exploit the vulnerabilities and inefficiencies of DEXes and token launches. These sniper bots can perform various malicious actions, such as:
- Front-running: This is when a sniper bot sees a pending transaction on the blockchain and places a higher bid before it is confirmed. This way, the sniper bot can buy the token at a lower price and sell it at a higher price, making a profit and increasing the transaction fees for the original buyer.
- Back-running: This is when a sniper bot sees a pending transaction on the blockchain and places a lower bid after it is confirmed. This way, the sniper bot can sell the token at a higher price and buy it back at a lower price, making a profit and decreasing the transaction fees for the original seller.
- Sandwiching: This is when a sniper bot places two orders around a pending transaction on the blockchain, one before and one after. This way, the sniper bot can create artificial price movements and squeeze the profits from the original trader.
- Sniping: This is when a sniper bot monitors the blockchain for new token launches and buys the token as soon as it is available before anyone else can. This way, the sniper bot can hoard the token supply and manipulate the price, creating a pump-and-dump scheme.
How do Sniper Bots Work?
Sniper bots work by using various tools and techniques to gain an edge over human traders and other bots. Some of the common methods used by sniper bots are:
- Web scraping: This is when a sniper bot collects data from various sources, such as websites, social media, forums, and blogs, to find information about upcoming token launches, price trends, and market sentiment.
- Smart contracts: This is when a sniper bot uses a smart contract to execute trades on the blockchain. A smart contract is a self-executing code that can perform predefined actions based on certain conditions. A sniper bot can use a smart contract to place orders faster, cheaper, and more securely than using a web interface or an API.
- Flash loans: This is when a sniper bot borrows a large amount of cryptocurrency from a lending platform for a short period of time, usually one block or less. A flash loan allows a sniper bot to leverage its capital and execute large trades without any collateral or risk. A sniper bot can use a flash loan to manipulate the market, arbitrage, or liquidate other positions.
- MEV (Miner Extractable Value): This is when a sniper bot pays a miner or validator to prioritize or reorder its transactions on the blockchain. MEV is the difference between the value of a block with the optimal ordering of transactions and the value of a block with the default ordering of transactions. A sniper bot can use MEV to front-run, back-run, or sandwich other transactions and increase its profits.
How Sniper Bots Pose a Risk to Your Blockchain Investments
Sniper Bots Pose a Risk to Your Blockchain Investments for both token developers and investors. Some of the main issues caused by sniper bots are:
- Market manipulation: Sniper bots can create artificial price movements, volatility, and liquidity by buying and selling large amounts of tokens in a short period of time. This can affect the fair value of the token, the confidence of the investors, and the reputation of the project.
- Loss of funds: Sniper bots can cause losses for both token developers and investors by exploiting the price differences, transaction fees, and slippage between different DEXes and platforms. Sniper bots can also drain the liquidity pools and cause rug pulls, where the token developers or the liquidity providers withdraw all the funds from the pool and leave the investors with worthless tokens.
- Unfair competition: Sniper bots can create an uneven playing field for human traders and other bots by using advanced tools and techniques to gain an advantage. Sniper bots can also prevent other participants from accessing the token launch or the market by hoarding the token supply or clogging the network.
How to Stop Sniper Bots?
There is no definitive solution to stop sniper bots from exploiting the DEXes and token launches. However, there are some possible measures that can be taken by both token developers and investors to mitigate the impact and risk of sniper bots.
Some of the Suggested Actions for Token Developers:
- Use a fair and transparent launch mechanism, such as a fixed price sale, a dutch auction, or a bonding curve, that can prevent price manipulation and ensure equal opportunity for all participants.
- Use a whitelist or a KYC (Know Your Customer) process to filter out potential sniper bots and verify the identity and eligibility of the participants.
- Use a vesting or a locking period to restrict the transfer and sale of the tokens for a certain amount of time after the launch. This can discourage sniper bots from dumping the tokens and create a long-term value proposition for the project.
- Use a reputable and secure platform or service to host the token launch and the liquidity pool. This can prevent sniper bots from exploiting the vulnerabilities and loopholes of the platform or the smart contract.
- Monitor and analyze the blockchain activity and the market behavior to identify and report any suspicious or malicious transactions or accounts.
Some of the Suggested Actions for Investors:
- Do your own research and due diligence before investing in any token or project. Check the credibility and legitimacy of the token developers, the platform, and the smart contract. Avoid investing in projects that have red flags, such as anonymous teams, unrealistic promises, or lack of transparency.
- Use a reliable and trustworthy wallet and exchange to store and trade your tokens. Choose a wallet and an exchange that have high-security standards, low transaction fees, and fast execution speed. Avoid using wallets and exchanges that are prone to hacks, scams, or delays.
- Use a limit order or a stop-loss order to protect your position and minimize your losses. A limit order allows you to buy or sell a token at a specific price or better. A stop-loss order allows you to sell a token automatically when it reaches a certain price or lower. These orders can help you avoid slippage, transaction fees, and market manipulation caused by sniper bots.
- Be cautious and vigilant when participating in token launches or trading on DEXes. Do not invest more than you can afford to lose. Do not follow the hype or the FOMO (Fear Of Missing Out). Do not trust anyone who claims to have insider information or offers to help you with the token launch or the trade.
How to Detect Sniper Bots?
Sniper bots can be hard to detect and track, as they can use various methods to conceal their identity and activity. However, there are some signs and indicators that can help you spot sniper bots and avoid falling victim to them. Some of the clues to look for are:
- Unusual price movements: Sniper bots can cause sudden spikes or drops in the token price, especially right before or after a token launch or a major announcement. These price movements can be disproportionate to the market conditions and the token fundamentals, and can be followed by a rapid reversal or a correction.
- High transaction fees: Sniper bots can increase the transaction fees on the blockchain by placing multiple or large orders in a short period of time. This can make the network congested and expensive, and prevent other users from executing their transactions smoothly and cheaply.
- Abnormal transaction patterns: Sniper bots can create abnormal transaction patterns on the blockchain, such as placing orders with odd amounts, decimals, or timestamps, or canceling and replacing orders frequently. These patterns can be detected by analyzing the blockchain data and the order book history.
- Suspicious accounts: Sniper bots can use suspicious accounts to execute their trades, such as accounts with no or low reputation, activity, or balance, or accounts that are created or used only for a specific token or event. These accounts can be identified by checking their profile and transaction history.
How to Report Sniper Bots?
If you encounter or suspect any sniper bots on the DEXes or the token launches, you should report them to the relevant authorities and platforms as soon as possible. This can help prevent further damage and protect the integrity and security of the blockchain and the cryptocurrency ecosystem. Some of the steps you can take to report sniper bots are:
- Contact the token developers or the platform administrators and provide them with the evidence and details of the sniper bot activity. You can use screenshots, links, or transaction hashes to support your claim. You can also ask them to take action against the sniper bots, such as banning, blocking, or blacklisting them.
- Contact the blockchain network or the protocol developers and provide them with the evidence and details of the sniper bot activity. You can also ask them to implement measures to prevent or reduce the impact of sniper bots, such as improving the transaction speed, security, and fairness, or introducing anti-sniper bot features or mechanisms.
- Contact the regulatory agencies or the law enforcement authorities and provide them with the evidence and details of the sniper bot activity. You can also ask them to investigate and prosecute the sniper bot operators, especially if they are involved in illegal or fraudulent activities, such as money laundering, tax evasion, or market manipulation.
In conclusion, by staying informed about how Sniper Bots Pose a Risk to Your Blockchain Investments and watchful of sniper bots, you can safeguard yourself and your tokens from their harmful activities. This way, you can fully embrace the advantages and prospects offered by DEXes and token launches. If you require additional guidance on specific wallets, tokens, metaverse projects, or any other cryptocurrency-related topics, feel free to leave a comment or send us an email. Your feedback serves as inspiration for our future articles.