Searcher Strategy

The core engine of any searcher strategy. It involves locally simulating pending transactions from the mempool or private order flows to predict their outcome and identify profitable opportunities before they are included in a block. This allows searchers to craft bundles or backrun transactions with a high degree of confidence.

• Key Tools: Geth's eth_call, specialized EVM simulators like Erigon or Revm.
• Purpose: To calculate potential profit, avoid failed transactions, and assess state changes without spending gas.

The logic layer that scans for specific, exploitable market conditions. This is defined by the strategy's focus, such as:

• DEX Arbitrage: Price discrepancies between decentralized exchanges (e.g., Uniswap vs. SushiSwap).
• Liquidations: Undercollateralized positions on lending protocols like Aave or Compound.
• MEV Extraction: Sandwich attacks, NFT floor price manipulation, or oracle price updates.

Strategies use event listeners and price feed monitors to trigger the simulation and execution pipeline.

The process of packaging one or more transactions for optimal execution and submission to validators or builders. A bundle is an atomic set of transactions with a specific order and gas parameters.

• Components: Includes the target opportunity transaction(s), any necessary frontrunning or backrunning transactions, and profit settlement.
• Routing: Deciding where to send the bundle—directly to a block builder via a private relay (e.g., Flashbots Protect, bloXroute) or to the public mempool (higher risk of being frontrun).

Critical for ensuring a searcher's bundle is included in the next block while maximizing net profit. This involves:

• Gas Estimation: Precisely calculating the gas limit for complex bundles to avoid out-of-gas failures.
• Priority Fee (Tip) Bidding: Dynamically setting the maxPriorityFeePerGas to outbid competing searchers. Advanced strategies use real-time gas price oracles and auction models.
• Profit Calculation: Net profit = (Strategy Profit) - (Total Gas Cost + Builder/Validator Tip).

Access to exclusive transaction streams is a major competitive advantage. Searchers often connect to:

• Private RPCs: From providers like Alchemy, Infura, or QuickNode, which may offer lower latency and dedicated endpoints.
• Private Mempools/Relays: Such as Flashbots, which provide a censorship-resistant channel to submit bundles directly to builders without exposing them to the public mempool.
• Order Flow Auctions (OFAs): Platforms like Cow Swap that auction off the right to execute user trades, providing a source of predictable, non-sandwichable flow.

Operational safeguards to prevent catastrophic losses. This includes:

• Circuit Breakers: Automatic shutdowns if profitability falls below a threshold or gas prices spike.
• Wallet Management: Using smart contract wallets or multisigs for holding funds and executing strategies, often with time locks or daily limits.
• Health Checks: Continuous monitoring of RPC connectivity, simulator accuracy, and blockchain re-orgs.
• Compliance Filters: Avoiding transactions involving sanctioned addresses to comply with OFAC regulations.

A strategy that exploits price discrepancies for the same asset across different decentralized exchanges (DEXs) or liquidity pools within a single block. Searchers identify these inefficiencies and submit transactions to buy low on one venue and sell high on another, capturing the spread as profit.

• Key Mechanism: Multi-hop swaps within a single atomic transaction.
• Example: Buying ETH on Uniswap where it's priced at $3,000 and simultaneously selling it on SushiSwap where it's priced at $3,010.
• Tools: Searchers use sophisticated MEV bots and real-time price feeds to detect opportunities.

A strategy that identifies and executes the forced closure of undercollateralized loans in lending protocols like Aave or Compound. When a borrower's collateral value falls below a specified health factor, their position becomes eligible for liquidation.

• Key Mechanism: Searchers submit a transaction to repay part of the debt and receive a portion of the collateral, plus a liquidation bonus.
• Incentive: The bonus, typically 5-15%, is the searcher's profit.
• Competition: This is a highly competitive, speed-sensitive strategy where the first valid transaction wins the reward.

A strategy where a searcher observes a pending profitable transaction in the mempool and submits their own transaction with a higher gas fee to execute first. This allows them to capture the value the original transaction intended to create.

• Classic Example: Seeing a large DEX trade that will move the price, a searcher buys the asset ahead of it and sells after the price impact.
• Sandwich Attack: A specific form of frontrunning where the searcher's transaction is placed both before and after the target transaction, 'sandwiching' it for profit.
• Controversy: This is often considered parasitic MEV, as it extracts value from ordinary users.

A strategy that executes a transaction immediately after a known profitable event, capitalizing on the state change it creates. Unlike frontrunning, it does not displace the target transaction but follows it.

• Key Mechanism: Searchers monitor for specific on-chain events (e.g., large oracle updates, governance votes, or protocol fee distributions) and submit transactions to benefit from the new state.
• Example: After a large DEX swap increases the price of a token, a backrunner might immediately deposit that token into a lending protocol as collateral to borrow other assets.
• Nature: Often less predatory than frontrunning, as it doesn't directly harm the initiating user.

Advanced strategies that target specific protocols, novel DeFi primitives, or cross-chain opportunities. These require deep domain expertise and custom tooling.

• NFT MEV: Includes sniping undervalued NFTs in blind mints, arbitraging across NFT marketplaces, or bidding in NFT liquidation auctions.
• Oracle Manipulation: Attempting to influence oracle price feeds (like Chainlink) within an oracle's update delay window to trigger liquidations or other events.
• Cross-Chain Arbitrage: Exploiting price differences for bridged assets (e.g., USDC on Ethereum vs. USDC on Arbitrum) by moving funds across chains.

A specialized strategy where a searcher provides liquidity to a DEX pool only for the duration of a single large trade, collecting the trading fees, and then immediately withdraws the liquidity. This is most common on automated market makers (AMMs) like Uniswap V3.

• Process: 1) Detect a large swap incoming. 2) Flash loan capital to provide concentrated liquidity around the current price. 3) Let the target swap execute against this new liquidity, earning fees. 4) Withdraw liquidity and repay the flash loan.
• Benefit: Provides deep liquidity for the swapper, improving their price execution, while the searcher earns fees with minimal capital risk.
• Risk: Requires precise execution and carries impermanent loss risk if the price moves during the block.

A strategy that exploits price discrepancies for the same asset across different DEXs (Decentralized Exchanges) or liquidity pools. A searcher's bot identifies the price delta and executes a sequence of transactions to buy low on one venue and sell high on another, profiting from the difference.

• Key Tools: Flash loans for capital efficiency, custom transaction simulation.
• Example: Buying ETH on Uniswap where it's priced at $3,000 and simultaneously selling it on SushiSwap where it's priced at $3,010.

A strategy that identifies undercollateralized positions in lending protocols (e.g., Aave, Compound) and submits a transaction to liquidate them, earning a liquidation fee as a reward. Speed is critical, as the first valid liquidation transaction gets the fee.

• Execution: Searchers run keepers that monitor loan health ratios.
• Complexity: Often involves flash loans to repay the debt and claim the collateral in a single atomic transaction.

A predatory strategy that targets large, pending DEX swaps. The searcher front-runs the victim's trade by buying the asset first (driving the price up), allows the victim's trade to execute at the worse price, and then back-runs by selling the asset for a profit.

• Requires: Ability to get transactions ordered before and after the target.
• Impact: Increases slippage and cost for the victim trader. This is a form of negative externality MEV.

Strategies that target niche opportunities beyond simple DEX arbitrage and liquidations. These are often more complex and require deep protocol-specific knowledge.

• Examples:
  • NFT MEV: Sniping undervalued NFTs, arbitraging across NFT marketplaces.
  • Governance MEV: Accumulating voting power to influence proposals for financial gain.
  • Oracle Manipulation: Creating price feed discrepancies to exploit derivative or lending protocols.

Executing searcher strategies involves navigating a landscape of costs, competition, and financial risk.

• Costs: Priority Fees (tips) to validators/builders, gas fees for complex bundles, and infrastructure expenses.
• Risks: Bundle failure (reverts), price slippage during execution, and competition from other searchers driving up bid prices.
• Profitability: Net profit = Extracted Value - (Gas + Priority Fees + Infrastructure Cost).

A predatory trading strategy where a searcher front-runs a victim's large DEX trade to buy the asset first, then back-runs it to sell at a higher price, profiting from the price impact. This results in slippage and worse execution for the victim.

• Mechanism: Detects pending swap, executes buy order before it, lets victim's trade move the price, then sells immediately after.
• Impact: User receives fewer tokens than expected; the attack is a direct financial loss extracted from the trade.

A high-risk strategy where a searcher or validator attempts to reorganize the blockchain (reorg) to alter past transaction ordering and capture MEV that was missed. This undermines finality and network stability.

• Mechanism: A validator withholds blocks or mines a competing chain to create a new history where their profitable transactions are included.
• Impact: Compromises settlement certainty, can lead to double-spends, and is considered a form of consensus-level attack.

Searchers compete to be the first to execute a liquidation on an undercollateralized loan in protocols like Aave or Compound. This creates a priority gas auction (PGA) and can harm the liquidated user.

• Mechanism: Bots monitor for unhealthy positions and submit transactions with extremely high gas fees to win the liquidation right.
• Impact: Drives up network gas prices for all users. The liquidated user may receive a smaller liquidation bonus (or none) due to the gas costs consumed by the searcher's transaction.

The high profitability of MEV extraction incentivizes the formation of proposer-builder separation (PBS) and centralized block-building entities. Searchers often sell their profitable transaction bundles to these builders.

• Risks:
  • Censorship: Powerful builders can exclude certain transactions or addresses.
  • Vertical Integration: Builders, validators, and searchers may merge, reducing network neutrality.
  • Barrier to Entry: The technical and capital requirements for competitive MEV extraction can lead to oligopoly.

Searchers use sophisticated mempool analysis to detect profitable opportunities. Users broadcasting plaintext transactions have their intent exposed, making them targets.

• Counter-Strategies:
  • Private Transaction Pools (e.g., Flashbots Protect): Submitting transactions directly to builders without public mempool exposure.
  • Slippage Limits: Setting strict maximum slippage can prevent some sandwich attacks but may cause trades to fail.
  • Aggregator Use: DEX aggregators often have built-in MEV protection.

Aggressive searcher behavior can stress-test and sometimes break DeFi protocol assumptions, leading to unexpected failures or economic attacks.

• Examples:
  • Oracle Manipulation: Bots may trigger large trades to move price oracles for personal gain.
  • Gas Exhaustion: Complex bundles can fill block gas limits, causing congestion and failed transactions.
  • Arbitrage Dependence: While arbitrage improves efficiency, over-reliance on bots for correcting market imbalances can be a fragility if they suddenly withdraw.

The maximum value that can be extracted from block production beyond standard block rewards and gas fees, by including, excluding, or reordering transactions. Searcher strategies are fundamentally designed to identify and capture MEV opportunities, which include:

• Arbitrage: Profiting from price differences across DEXs.
• Liquidations: Triggering and capturing liquidation bonuses in lending protocols.
• Sandwich Trading: Profiting from large DEX trades by frontrunning and backrunning them.

A package of one or more transactions, submitted by a searcher to a builder or relay, with specific execution requirements. Bundles are the primary tool for complex searcher strategies, allowing for atomic execution (all transactions succeed or fail together) and specifying ordering constraints. This is essential for multi-step arbitrage or liquidation strategies that would be risky if executed individually.

A design paradigm that separates the roles of block proposal (validators) and block construction (builders). PBS is critical for modern searcher ecosystems as it creates a competitive market where builders source the most profitable blocks from searchers' bundles. This specialization improves chain efficiency and can help mitigate negative externalities of MEV.

A private transaction pool where searchers can submit their MEV bundles without revealing them to the public mempool. Using a relay (like Flashbots) prevents frontrunning and sandwich attacks from other searchers, protecting strategy profitability. The relay forwards the most valuable bundles to trusted builders for inclusion in a block.