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The Ethereum Foundation, a non-profit supporting the development of the Ethereum network, recently lost over $9,000 to an MEV bot when it sold ETH for $2.7 million.
Recall that the Ethereum Foundation sold off precisely 1,700 ETH tokens for $2.7 million in USDC yesterday at 08:18 (UTC), as previously reported by The Crypto Basic. This selloff raised concerns among market participants, especially amid a price drop.
However, recent discoveries suggest the transaction has a considerable twist. Blockchain reporter Colin Wu highlighted that the Ethereum Foundation’s wallet address fell victim to a sandwich attack from a Miner Extractable Value (MEV) bot, losing $9,101 during the transaction.
According to EigenPhi data, when the Ethereum Foundation sold 1.7k ETH through Uniswap V3 yesterday, it suffered a Sandwich attack by MEV Bot (0x00…6B40) and lost US$9,101. After deducting the cost, the MEV Bot made a profit of US$4,060. https://t.co/CRgLTsXyuP https://t.co/sMJlUzY8iD
— Wu Blockchain (@WuBlockchain) October 10, 2023
Details of the ETH Transaction
Data from the on-chain analytical resource EigenPhi provides details of the sandwich attack. Notably, the Ethereum Foundation initiated a transaction to sell 1,700 ETH for $2.7 million on the prominent decentralized exchange, Uniswap V3.
However, the MEV bot, designed to monitor transactions on the Ethereum network, detected the pending transaction from the Ethereum Foundation. It quickly submitted its transaction, aiming to front-run the Ethereum Foundation’s trade.
The MEV bot’s transaction caused a temporary price movement, which resulted in the Ethereum Foundation getting a less favorable exchange rate for their ETH sale. This price manipulation benefited the MEV bot but caused a loss for the Foundation.
After executing its strategy, the MEV bot secured $9,101. This considers the difference between the less favorable price at which the Ethereum Foundation sold its ETH and the more favorable price at which the MEV bot obtained ETH. Notably, the MEV bot was built with $5,041, leaving the bot’s profit at $4,060.
Demystifying MEV Bots
MEV bots identify and exploit opportunities in blockchain transactions to maximize profits by reordering, front-running, or sandwiching these transactions to benefit the bot operator.
A sandwich attack involves placing two transactions before and after a target transaction to manipulate its outcome for profit. The attacker first identifies a target transaction, typically a massive buy or sell order.
They then quickly submit their transactions before and after the target transaction. The goal is to take advantage of the price movement caused by the target transaction, benefiting from it by buying at a lower price or selling at a higher price.