Part 1. Introduction

This is the very first article of the series of building a Snipe bot based on whales signal on Ethereum. In this article, I will walk you through the strategy, the architecture and tech stack of the trading bot system.

Background

You might have heard about MEV (Maximal Extracted Value) bots in crypto. These bots are built based on the principles of blockchain technology which are decentralization, permissionless and composability. Similar to algorithmic trading in traditional finance, there are many strategies to build trading system or bot on blockchain. In my view, snipe bot is the simplest and can be the starting point for any algorithmic trader want to explore this field. Building snipe bot can give you the understanding how the MEV bots work, and establish a good foundation for any MEV searcher.

Strategy

Let’s analyze the snipe bot strategy. As the name suggested, the snipe bot is built based on the rule of early buying tokens after their TGE, then waiting for its price is pumped thanks to market making activities, and selling these tokens at a higher price. “Buy low, sell high”, simple like that.

Get 0xbarchitect’s stories in your inbox

Join Medium for free to get updates from this writer.

Remember me for faster sign in

There are several questions that need to be solved in a snipe bot, including:

• How does system know about token TGE?
• Which are potential tokens to buy?
• When does system sell them?

In order to build an efficient snipe bot, we need to solve all these questions.

Architecture

The following diagram demonstrates the high-level architecture of the trading bot system.

Figure 1. Snipe bot architecture.

These are main components of the system and its responsibility:

• Indexer: listens to Uniswap transactions and events to detect token TGE and token swap, indexes these data and provide them to downstream components in the system.
• Whale tracking: manages a database of whale addresses, constantly listens to their token transfer activities to detect new tokens that are accumulated.
• Alpha engine: subscribes to Indexer and Whale-tracking for token signal, then verifies token eligibility, and provide alpha signal to trade.
• Executor: the last component in the pipeline that is responsible for executing trade. Upon receiving alpha signal from engine, executor will trigger buying or selling transaction to blockchain.

Tech stack

The tech stack utilizing to build the bot as follows:

• Backend: Python
• Smart contract: Solidity
• Infrastructure: Ubuntu, Ethereum Geth node

This is the introduction article of the series of building Snipe bot based on whale signals on Ethereum, in the next article we will learn how to build an Indexer to index onchain data, particularly the token TGE and swap on Uniswap. Stay tuned!