A sandwich bot involves "sandwiching" the Target’s transactions between two transactions initiated by the Searcher or Attacker, which Reorders transactions and benefits Attacker.
How exactly does the attacker gain revenues during the process? Here is an example.
1.In a UNISWAP liquidity pool, Bob is a retail investor who wants to trade 1000 $WETH for $USDC. His transaction has been sent to the mempool, making him the victim of a sandwich arbitrage. The transaction is marked as ① in the figure below.
2.Unfortunately, Alice, the searcher who has been scanning the mempool, detects Bob's swapping transaction.
3.Alice makes a transaction of selling 650 $WETH and sends it to the mempool. In the end, she receives 1,842,200 $USDC at the exchange rate of 1 $WETH for 2,834 $USDC. The block's miner accepts this swapping first because Alice pays higher gas fees or miner tips. The swapping causes the exchange rate to change to 1 $WETH for 2,821 $USDC. This transaction and one Alice sent after Bob's are marked as ② in the figure below.
4.Bob's transaction goes through the mempool and to the block selling 1000 $WETH for 2,821,000 $USDC, which he should have been able to get 2,834,000 $USDC.
5.Alice's selling of 1,842,200 $USDC passes the mempool and gets recorded by the miner in the block. She receives 652.9 $WETH.
Alice's revenue from this Sandwich arbitrage is 2.9 $WETH. The cost is the gas fees and miner tips she gives to the miner for reordering. Assuming it's 1.2 $WETH. In the end, Alice's profit is 1.7 $WETH.
