Understanding the Profitability of MEV Contracts through “Sandwich Attacks”

On April 30th, EigenPhi detected that three MEV contracts had made significant profits through “sandwich attacks”. The MEV contract starting with 0x6b75 earned a profit of $465126 from $33374 within 7 days, with a return on investment of 1400.1%. The MEV contract starting with 0x4707 earned a profit of $27204 from $18 within 7 days, with a return on investment of 64346%. The MEV contract starting with 0x0000 earned a profit of $45496 from $687 within 7 days, with a return on investment of 3145.5%.

A sandwich attacker earned over $460000 for $30000

Introduction

On April 30th, EigenPhi, a blockchain analytics firm, detected that three MEV (Miner Extractable Value) contracts had made significant profits through something called “sandwich attacks”. In this article, we will explore what MEV contracts are, how “sandwich attacks” work, and the profits earned by these three specific contracts.

What are MEV Contracts?

MEV contracts derive their name from the fact that they enable miners to extract value from the network. Essentially, instead of just mining blocks to earn transaction fees, miners with MEV contracts can earn even more by vertically integrating the process of transaction validation. These contracts allow miners to identify and exploit the differences between the time when a transaction is added to the mempool and when it is actually included in a block. This can be lucrative as miners can earn more transaction fees than they would otherwise receive.

What are “Sandwich Attacks”?

“Sandwich attacks” occur when someone monitors a blockchain network for incoming transactions. They place their own transaction in the mempool of the network, which effectively stops the transaction from being included in a block right away. Then they place an order with a DEX to buy the token that the first transaction creator wants to buy. Once the order is placed in the DEX and before it is executed, the attacker then executes their transaction on top of the first transaction, thereby front-running it. Finally, the attacker cancels their DEX order, ensuring they don’t actually lose money. This sequence of events, called a sandwich attack, enables the attacker to gain the maximum benefit from the price fluctuations caused by the first order creator’s activity, thereby profiting from the difference in the token’s price.

The Profitability of Three MEV Contracts

EigenPhi’s analytics showed that on April 30th, three MEV contracts earned significant profits through “sandwich attacks”. The three contracts and their respective profits are as follows:

#MEV Contract Starting with 0x6b75

This contract earned a profit of $465126 from an initial investment of $33374 within 7 days, resulting in a return on investment of 1400.1%. The profitability of this contract likely stems from it being strategically placed in the network to take advantage of valuable transactions.

#MEV Contract Starting with 0x4707

This contract earned a profit of $27204 from an initial investment of $18 within 7 days, resulting in a return on investment of 64346%. The profitability of this contract is likely due to the fact that it was able to exploit a small market inefficiency in a token’s price, which was magnified when the sandwich attack was executed.

#MEV Contract Starting with 0x0000

This contract earned a profit of $45496 from an initial investment of $687 within 7 days, resulting in a return on investment of 3145.5%. The profitability of this contract is likely due to it being placed in a network which had rising token prices and a high demand for inefficient transactions.

Conclusion

In conclusion, the use of MEV contracts and sandwich attacks is a complex strategy that enables miners to extract value from blockchain networks. The profitability seen in these three MEV contracts provides insight into the potential high returns that can be achieved through this method of extracting value from blockchains.
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FAQs

1. What are MEV contracts, and how do they work?

MEV contracts enable miners to extract value from blockchain networks by vertically integrating the process of transaction validation. This process allows miners to identify and exploit price differences between the time when a transaction is added to the mempool and when it is actually included in a block.

2. What are “Sandwich Attacks”, and how do they work?

“Sandwich attacks” refer to a sequence of events where attackers place their own transaction in the mempool of a blockchain network, execute their own transaction on top of an incoming transaction, and then cancel their own transaction to profit from the difference in token prices. This process is made possible by monitoring blockchain networks for incoming transactions.

3. Can anyone execute a “Sandwich Attack”?

No, the ability to execute a successful “Sandwich Attack” requires a deep understanding of blockchain networks, the ability to monitor incoming transactions, and the knowledge of how to successfully execute transactions at the right time to maximize profits.