Liquidity Snipping

A liquidity sniper bot automates the process of front-running a liquidity pool's creation. It monitors the mempool for pending transactions that add initial liquidity, then submits a transaction with a higher gas fee to execute first. The bot buys the token at the initial, artificially low price and immediately sells it for profit in the same block, often before the liquidity provider's transaction is confirmed. This is a direct application of Miner Extractable Value (MEV).

Successful sniping requires specialized infrastructure:

• Mempool Monitoring: Services like Blocknative or private RPC endpoints to see pending transactions.
• Flashbots Protect RPC: Used to submit bundle transactions directly to miners/validators, bypassing the public mempool to avoid being front-run themselves.
• Smart Contract Wallets: Deployer contracts with the snipe logic baked in, allowing atomic buy-and-sell operations in a single transaction to mitigate risk.
• Gas Optimization: Bots must calculate and bid optimal gas prices to win the block space auction.

Liquidity sniping creates significant friction for fair launches and new projects:

• Price Volatility: Causes immediate, extreme price pumps and dumps, damaging token credibility.
• Increased Cost for Launchers: Projects may need to use launchpads or vesting mechanisms to deter snipers, adding complexity.
• Liquidity Provider (LP) Risk: The initial LP often ends up holding a bag of devalued tokens, as the sniper extracts value from the initial capital injection. This is sometimes called a LP snatch.

The ecosystem has developed several defenses against sniping:

• Liquidity Locks: Using services like Unicrypt to timelock LP tokens, though this doesn't prevent the initial sniping transaction.
• Stealth Launches: Adding liquidity without prior announcement and with high initial slippage tolerance.
• Fair Launch DEXs: Platforms like SushiSwap's MISO or Balancer LBPs use mechanisms like gradual price discovery to mitigate sniping.
• Private Pools: Creating the initial pool with a whitelist of addresses before opening it to the public.

Liquidity sniping is a prominent form of Generalized Front-running and a subset of Miner Extractable Value (MEV). It represents a value transfer from liquidity providers and early retail buyers to sophisticated bots and validators. The economic activity and high gas fees generated by sniping bots are a key driver of MEV revenue on networks like Ethereum, influencing validator incentives and network congestion.

1. Detection: A bot sees a pending addLiquidity transaction for a new token/ETH pair.
2. Execution: It submits a bundle with a higher gas fee, containing a swapExactETHForTokens call to buy most of the new tokens.
3. Profit-Taking: In the same bundle, it includes a swapExactTokensForETH call to sell the newly acquired tokens back into the now-established pool.
4. Result: The bot profits from the arbitrage between the initial artificially low price and the post-liquidity market price, often within seconds, leaving the LP with less ETH and more of the token.

A liquidity sniping bot monitors the mempool for pending transactions that create new liquidity pools or add significant initial liquidity. The bot then front-runs the victim's transaction, buying a large amount of the new token before the official liquidity is available, and immediately selling it into the new pool at an inflated price. This exploits the initial price discovery mechanism, often leaving the legitimate liquidity provider with a pool of devalued tokens.

The primary victim is the project or team providing the initial liquidity. The attack can:

• Drastically reduce the effective launch price of the token, harming early investors.
• Skew the initial token distribution towards the attacker instead of the intended community.
• Erode trust in the project's launch integrity, potentially causing a permanent loss of confidence and liquidity.
• Force projects to implement complex and costly launch strategies to mitigate risk.

A common but imperfect defense is to lock the initial liquidity provider (LP) tokens in a time-locked smart contract. This prevents the immediate removal of liquidity, which could be part of a rug pull. However, it does not prevent the sniping attack itself—the attacker can still front-run the initial purchase. Locks are a trust signal for investors but are not a technical barrier against sniping bots.

Projects can architect their launch to neutralize sniping bots:

• Using a bonding curve or gradual liquidity addition to avoid a single, large, predictable liquidity event.
• Employing stealth launches or private mempools (like Flashbots) to hide the liquidity-adding transaction from public view.
• Implementing initial token vesting for the team and early contributors to prevent immediate large sells that bots anticipate.

Liquidity sniping is a specific form of Maximal Extractable Value (MEV). It is executed by searchers who bundle their snipe transaction with a high-priority fee, convincing block builders to order transactions in their favor. This places the attack within the broader, competitive landscape of blockchain consensus and transaction ordering, making it a systemic protocol-level challenge.

The prevalence of sniping has influenced the design of decentralized exchanges and launch platforms. Newer AMM designs and launchpads often incorporate:

• Variable price functions during the initial phase.
• Permissioned or whitelisted initial liquidity phases.
• Direct integration with MEV protection services to ensure fair transaction ordering for the project's foundational transactions.

A foundational defense where the project team or initial liquidity providers lock their tokens in a smart contract for a predetermined period (e.g., 1-2 years). This prevents the immediate removal of liquidity, which is a primary target for snipers. Locked liquidity increases investor confidence and makes it economically unfeasible for a sniper to attack a pool that cannot be drained.

Instead of releasing all tokens at launch, a vesting schedule gradually releases tokens to team members, advisors, and early investors over time. This prevents large, predictable sell-offs that snipers could front-run. Common structures include:

• Cliff periods (no tokens released for an initial phase)
• Linear vesting (tokens released evenly over months/years)

These protocols are designed to neutralize the advantage of automated bots. Key implementations include:

• Liquidity Generation Events (LGEs): A time-bound event where users contribute a base currency (e.g., ETH) to bootstrap liquidity, with tokens distributed proportionally afterward, eliminating a pre-defined launch price.
• Vesting on DEX Listing: Newly purchased tokens are locked for a short period after a pool is created, preventing immediate selling.

Smart contracts can implement logic to deter sniping at the protocol level.

• High Initial Transaction Fees: Temporarily elevated fees on the pool's first blocks can reduce sniper profitability.
• Maximum Slippage Limits: Setting a hard cap on acceptable price impact for the first N transactions prevents large, pool-distorting buys.
• Anti-bot Slippage: Protocols like Maestro allow token contracts to reject trades from known sniper bot addresses.

This strategy involves creating the initial liquidity pool with a significant amount of capital and a balanced ratio before publicly announcing the token address. By the time the pool is discoverable by bots, the initial price is already stable and the price impact of a large buy is minimized, removing the arbitrage opportunity snipers seek.

A broad category of strategies where a transaction is submitted with higher gas fees to execute before a known pending transaction, profiting from the price impact of that transaction. Liquidity sniping is a specific form of front-running that targets new liquidity pools.

• General Front-Running: Can target any pending trade, arbitrage, or liquidation.
• Miner Extractable Value (MEV): Front-running is a primary source of MEV, where validators reorder transactions for profit.

A related MEV attack that targets existing liquidity pools. The attacker front-runs a large victim's swap with their own buy order, and then back-runs it with a sell order, profiting from the artificial price movement they create.

• Key Difference: Targets swaps in existing pools, whereas sniping targets initial pool creation.
• Mechanism: Requires two transactions (buy then sell) around the victim's trade.

An event where a new token's initial liquidity is added to a DEX like Uniswap. This is the primary target for liquidity snipers.

• Process: Creators deposit both the new token and a paired asset (e.g., ETH) into a pool, setting the initial price.
• Vulnerability: The pool address and deposit timing are often public on-chain before trading is enabled, creating a snipeable window.

Uncollateralized loans that must be borrowed and repaid within a single blockchain transaction. They are a critical tool for sophisticated liquidity sniping and other MEV strategies.

• Use in Sniping: Allows snipers to borrow large capital to purchase the majority of a new token's initial supply without upfront capital.
• Atomic Execution: The entire snipe-and-repay logic happens in one block, eliminating liquidation risk.

The total value that can be extracted by block producers (validators/miners) by reordering, including, or censoring transactions within a block. Liquidity sniping is a form of on-chain MEV.

• Searchers: Independent bots that compete to discover and execute profitable MEV opportunities like sniping.
• MEV-Boost: A protocol that allows Ethereum validators to outsource block building to specialized searchers, often capturing sniping profits.

A smart contract that holds reserves of two or more tokens and facilitates trades via an automated market maker (AMM) formula, such as the constant product formula x * y = k. This is the battlefield for sniping.

• Constant Product Formula: Means the price moves with each trade, creating the profit opportunity for the first buyer.
• Pool Initialization: The act of depositing the first tokens, which sets the initial k constant and the starting price.