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Ethereum transaction fees skyrocket, here is why

Cryptocurrency trading has been making headlines for quite some time now. While many investors have gained massive profits by investing in digital assets, some traders have been using bots to front-run the market and manipulate prices to their advantage. The latest news in this regard is the emergence of the Jared bot, which has been identified as a major contributor to the soaring transaction fees of Ethereum (ETH).

The Jared bot is associated with the Ethereum Name Service (ENS) domain “jaredfromsubway.eth”. It has been targeting the emerging memecoin, PEPE Memecoin (PEPE), which has been the talk of the town lately.

According to data from EigenPhi, the bot made a profit of $2.7 million within a week from April 17, 2023. During the same period, over 60% of Ethereum blocks were made up of transactions originating from the bot.

The bot has been using a technique called a “sandwich attack” to make a profit. In a sandwich attack, the attacker takes advantage of the pending state in the mempool and issues their own deals with higher gas prices before their target deals to ensure priority processing. This way, the attacker buys tokens at a lower price and subsequently sells them at a higher price, earning a profit. As a result of such activities, Ethereum gas prices have risen to their highest level since May 2022.

Source:  EigenPhi

The Jared bot has been identified as a major contributor to the rising gas fees on the Ethereum blockchain. Between the start of operations on February 27, 2023, and May 8, the bot spent $34.35 million instead of paying $40.65 million in gas bills and made a net profit of $6.3 million. During this time, the bot made 254,000 transactions, 98.31% of which were identified as sandwich attacks.

In early May 2023, Ethereum’s gas prices surged to the highest level seen since May 2022. Average transaction costs escalated from an October low of 9.07 gwei to a peak of 155.8 gwei on May 5, and currently, the average stands at 55 gwei. Notably, this bot’s gas expenditure constitutes a significant portion of the overall gas consumption on the blockchain.

In response to the growing number of bots engaged in such activities, CoW Swap has developed a product called MEV Blocker in collaboration with Agnostic Relayer. This product is designed to protect users from sandwich attacks and other MEV-related bots. It processes transactions through a network of users who seek out MEV opportunities called searchers.

The rise of the Jared bot and other MEV-related bots highlights the need for measures to counteract such activities. While the use of bots for trading purposes may be legal, their activities should not be detrimental to other market participants. As blockchain technology continues to evolve, it is crucial to develop effective solutions that protect users and prevent unfair market practices.

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