Kaizen.Finance Explains: How Automated Bot Attacks Can Turn Your Token Launch into a Complete Disaster
As both real-world and blockchain projects continue to relentlessly explore the world of new cryptocurrency ventures, malicious actors also persist in their pursuit of exploiting vulnerabilities and undermining security measures.
With eight years in the crypto industry under our belt, we’ve gained invaluable insight into the issues that often arise when projects aim to ensure token security both at launch and throughout its lifecycle.
And today, to give you a full understanding of why token protection matters, we’re sharing with you the top list of the most nefarious automated bot attacks that could spell catastrophe for your token launch.
How Do You Protect Your Investments When a Trader’s Sniper Bot Rakes in $7 Million?
Sniper bots are automated software tools developed to monitor real-time market data and trade liquidity pairs on decentralized exchanges (DEXes) at predetermined times. The primary objective of a sniper bot is to capitalize on market fluctuations by swiftly executing trades to buy low and sell high, or the other way round.
Sniping bots particularly adept in pump-and-dump schemes commonly observed in less renowned coins.
Take a look at an example of a sniping attack where the trader employed a widely-used sniping trading bot to secure the first purchase of the newly launched SatoshiVM tokens. By doing so, he managed to make 7 million dollars in profit in just three (!) hours.
The trader leveraged the sniping strategy, investing 141.66 ETH to secure the earliest purchase of SAVM at the launch, acquiring more than 2.5 million tokens.
Subsequently, he sold 2.16 million tokens for $4.38 million and retained 450,000 SAVM tokens, valued at an estimated $3 million, resulting in approximately $6.77 million in total profits.
Generally, the essence of this type of an attack is that once a project token is listed on an exchange, the bot quickly acquires it at a low price, artificially inflates its value, and encourages the project community to buy it at inflated prices.
“However, a large part of the increased threat posed by sniper bots is that protecting a token on a centralized exchange alone does not inherently extend to protection on a decentralized exchange, and vice versa. That’s why it’s important to ensure comprehensive, 360-degree protection for your token across all platforms.
And unfortunately for projects and their communities, the challenges are far from over!
Enter MEV bot attacks.
MEV Bots Exploits: How Blockchain Vulnerabilities Could Cost Your Project Millions
MEV (abbr. for Maximum Extractable Value) bots are automated programs that scan blockchain networks for profitable trading prospects and execute orders autonomously.
These bot attacks succeed due to the blockchain’s capability to prioritize transaction execution based on fees; higher fees mean higher priority. MEV bots capitalize on this by seeking out the highest extractable values, elevating their execution priority, and thus generating profits for their owners.
Typically, MEV attacks involve bots that simulate pending transactions and include front running, back running, and combined so-called sandwich attacks.
Front Running: The Shocking Truth Behind a Manipulative Attack
Front running is the artificial manipulation of the price of a digital asset in order to buy it at an undervalued price at the beginning of trading and then resell it at an inflated price for a profit.
Generally, this attack goes as follows:
- When a user is about to buy a token, the bot quickly “jumps” ahead of the purchase, and buys the token first at the current price.
- The price of the token immediately goes up due to the increased demand.
- After the user buys the token at the higher price, the bot sells its tokens back to the market.
Here, the profit is made from the difference between the original price the bot paid and the higher price the user paid.
Back Running Exposed: The MEV Bot Snatches a Whopping $1.73 Million After $8.9 Million Token Buy
Back running refers to a situation where an attacker makes a profit on executing a transaction immediately following another.
For instance, imagine a scenario where a bot places a buy order after detecting a transaction listing a new token on an exchange. Its aim is to later sell these tokens at a higher price.
Have a look at the primary example of a back running attack: A MEV bot operating on Solana managed to make an impressive $1.7 million merely from a single transaction. This happened when a trader bought $8.9 million worth of Dogwifhat (WIF) memecoin in one go.
Here’s some of the anatomy behind this attack:
When a single trader bought $8.9 million worth of memecoin in a single order, a MEV bot detected this significant transaction and swiftly executed its own series of trades to capitalize on the opportunity: taking advantage of the back-running strategy, the bot exchanged 703 Solana for 490,000 WIF and then traded that same amount of WIF for 19,035 SOL in the same transaction bundle, resulting in substantial a profit of $1.73 million.
The front running and back running attacks differ from the more malicious “sandwich” attacks. In these schemes, an order is strategically “sandwiched”, or positioned, between two transactions.
Sandwich Bots’ Sneaky Tactics Rob Traders of Profits
Sandwich bots specialize in identifying transactions that influence prices in order to maximize profits. They achieve this by executing a buy order immediately preceding the targeted transaction and a sell order immediately succeeding the targeted transaction.
Here’s how a typical sandwich bot attack would look like:
- An attacker monitors pending transactions to identify lucrative targets.
- Initiates a transaction with a higher gas fee to beat a victim’s transaction.
- Purchases the same token as the victim, driving up the transaction price.
- Submits another transaction after the victim’s, prioritized for immediate processing.
- Sells tokens purchased in the first transaction at a higher price after the victim’s transaction.
- Victim suffers loss as token price falls, while the attacker profits from price disparity.
This tactic exploits market inefficiencies and can result in substantial profits for the bot operators.
“The idea that sandwich bots exclusively prey on large transactions is misleading; even transactions involving just a few hundred dollars in tokens can fall victim to these attacks.”
In closing, it’s crucial to recognize that the considered bot attacks are prevalent and widely used methods for capitalizing on newly launched tokens.
In order to protect tokens against these threats, our cybersecurity experts at Kaizen.Finance have developed solutions aimed at preventing and deterring bot attacks at their very outset.
In addition to this protection, our comprehensive protection extends to:
- DDoS (distributed-denial-of-service) protection, where multiple compromised systems (botnets) as sources disrupt the normal traffic of a target server, service, or network.
- Blacklisting protection. Suspicious user wallets are frequently associated with fraud and malicious activities. To address this issue, we incorporate wallet blacklisting for early detection and prevention of suspicious wallets.
- Solana token protection. Automated bots often exploit vulnerabilities in blockchain networks. Our enhanced security now covers projects issuing tokens via Kaizen.Finance on the Solana network.
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How to request token protection solutions?
To shield your token from automated bot attacks with Kaizen’s professional cybersecurity protection solutions, contact us today via our website’s Contact Us page, schedule a call on the dedicated Security and Protection service page, or send your request to info@kaizen.finance.
Either way, our team will be happy to provide you with more information about the security and protection services, and help you choose a solution that you’re most interested in.
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