When trading in cryptos being in a sandwich will cost you!
Not only do humans trade cryptos but Bots do as well. A Bot is a robot. Crypto Bots perform automatic trading, and they have amassed hundreds of millions of dollars doing it.
They accomplish this by implementing a SANDWICH Trade. Creating a Sandwich is a process in which a Bot is programmed to spot another trader trying to buy a digital coin on a blockchain network, for example, Ethereum or Cardano. The Bot then places a buy order for the same coin. If the Bot succeeds and completes the buy transaction before the other trader, doing so pushes the price of the coin fractionally higher.
It is most probable that the original trader is going to purchase the coin at the slightly higher price. That’s when the Bot completes the ‘sandwich’ and sells the coin to the trader for the fractionally higher price.
Sandwich trading occurs 24/7/365 and those fractions add up! In the last few years, Bots have racked up enormous profits. In fact, they have been so successful it has become much harder for other Bots to make money on Ethereum so have moved on to blockchains such as Solana, Polygon, and Avalanche.
Are Bots a blockchain’s worst nightmare? Solana, for example, announced that it was implementing a series of “flow control measures” designed to enhance their blockchain’s performance and manage the influx of Sandwich trading. Note the word, manage. They don’t want to stop the Bot sandwiching completely because they are receiving commissions (gas) for each transaction placed.