Understanding Bots and Whales on Ethereum: An introductory guide.

The bots can automate trading and other activities, while whales have the power to significantly influence market prices due to their large holdings.

In this article I will explain the roles, benefits and threats posed by these agents, and I will give you a solution so that you can cover your token from them without the need for programming.

If you want to apply anti-bot and anti-whales mechanisms, we suggest you to see our article on this subject.

For token creators and administrators, the bots and whales represent two factors that can influence token performance.

The bots, through automation, improves efficiency but also presents risks of market manipulation.

Whales, with their holding strategies, can alter market trends.

Let's take a step-by-step approach.

What are Bots on Ethereum?

Bots on Ethereum are automated programs designed to interact with the blockchain and perform various tasks. These tasks range from simple transactions to complex trading strategies.

The bots can execute transactions, manage assets and even engage in arbitrage, all without human intervention. Many are simply an executable script that must be monitored.

Types of Bots on Ethereum

Below, I am going to name the most famous bots groups that you have probably heard of. But, if you want to know absolutely all the types of bots found on the net, we suggest you to check out our classification guide of bots at Ethereum.

1. Bots Arbitrage: These bots take advantage of price differences in several exchanges. For example, if Ethereum has a lower price on one exchange compared to another, the bot buys at the lower price and sells at the higher price, making the difference.
2. Bots Market Makers: These bots provide liquidity to the market by placing buy and sell orders. They profit from the bid-ask spread, the difference between the bid and ask prices.
3. Sniper Bots: Sniper bots quickly buy newly listed tokens on decentralized exchanges (DEX) before human traders can react. These bots monitor the blockchain for new token listings and execute purchases almost instantly.
4. MEV (Maximum Extractable Value) Bots: MEV bots are sophisticated tools that exploit inefficiencies in the Ethereum blockchain. They engage in front-running, back-running and sandwich attacks to maximize profits from transaction ordering.

How Bots Work on Ethereum

Bots on Ethereum operate based on predefined rules and algorithms. They interact with the blockchain using smart contracts and APIs to monitor market conditions and execute transactions. Here's a closer look at their operating mechanics:

• API integration: bots connects to exchanges through APIs to access market data and execute transactions.
• Smart Contracts: Use smart contracts to automate trading strategies and ensure that transactions are executed according to defined rules.
• Algorithmic Trading: bots deploys complex algorithms to analyze market trends, identify trading opportunities and execute trades at optimal times.

Influence of bots on the present day

The bots currently has an influence of US$ 20 billion on average per month in transaction volume on the Ethereum network, as suggested by eigen.phi on its website.

The largest volume is occupied by sandwich-style bots with US$ 17.7 billion. Although they account for almost 90% of the transaction volume, their share of profit has dropped significantly.

The majority profit comes from the MEV bots with US$ 5 million versus US$ 1.5 million for the sandwich. The MEVs bots with smaller transactions obtain higher profits.

The Role of Whales on Ethereum

Whales are individuals or entities that own large amounts of Ethereum. Their significant holdings allow them to influence market prices through their trading activities.

Behavioral Characteristics of Whales

1. Market Impact: When whales make large transactions, they can cause substantial fluctuations in prices. A whale selling a large amount of Ethereum can drive prices down, while a large purchase can drive prices up.
2. Strategic Moves: Whales often trade in patterns. They may accumulate Ethereum over time and then sell during price spikes. By studying these patterns, smaller traders can anticipate market movements.
3. Liquidity Provision: Whales often provide liquidity to the market, making it easier for other traders to buy and sell Ethereum without causing significant price changes.

Analyzing Whale Behavior

To predict and understand whale movements, traders often use tools and techniques such as:

• On-Chain Analysis: Tracking large transactions and wallet activity on the blockchain.
• Market Sentiment Analysis: Assessment of the general market mood through social media and news trends.
• Historical Patterns: Study of historical data to identify recurring trading patterns and behaviors.

Relationship between Bots and Whales

The bots, with their speed and efficiency, can sometimes counteract the influence of the whales by responding quickly to market changes. In turn, whales can deploy sophisticated bots to manage their large holdings more effectively.

Anti-Bot and Anti-Whale Tools

bots To mitigate the influence of bots and whales, especially during token launches or trading activities, token developers and creators can implement anti-bot and an ti-whale measures. Smithii offers anti- and anti-whale tools designed to effectively address these challenges.

Smithii is one of the few software on the market that offers an anti-bots and anti-whales solution without the need for programming:

• For Whalesyou will find it in the token manager section at anti-whales.
  • Limit Quantity per Trade: This feature sets a maximum limit on the amount of tokens that can be traded in a single transaction, avoiding large trades that could disrupt the market.
  • lock Quantity Limit: This restricts the total amount of tokens that can be traded within a single lock, ensuring that no one entity can monopolize trading activity within that lock.
• For Botsyou will find it in the token manager section at anti-bots.
  • Time Limit per Trade: This introduces a minimum time interval between trades, reducing the effectiveness of high frequency trading bots .
  • lock Number to Disable Anti-Bots: This allows token creators to set specific lock numbers where anti-bot measures are temporarily disabled, facilitating fair trading during critical events such as token launches.

The Expected lock vs. The Real lock Due to Bots

In the Ethereum blockchain, the sequence and composition of locks can be influenced by the actions of bots. This divergence between the expected lock and the actual lock due to the activities of bots is significant for understanding the dynamics of the blockchain.

You can check this info by clicking on a lock in mempool.

How Bots Influence lock Composition

The bots are responsible for changing the locks as follows:

• Front-Running: Bots can detect and preempt transactions by paying higher gas rates to prioritize their transactions, altering the expected order of transactions within a lock.
• Sandwich attacks: bots executes a buy order before a large transaction and a sell order right after, taking advantage of the price movement caused by the large transaction.
• Transaction Bundling: Bots can group multiple small transactions together to manipulate gas prices or execute strategic transactions, thus affecting the final composition of the lock.

The Use of Bots by lock Validators

lock validators, especially in a Proof of Stake (PoS) system like Ethereum, can use bots to increase their profits and efficiency.

Strategies Employed by Validators

As part of the PoS consensus mechanism, validators are responsible for verifying new locks and adding them to the chain for rewards. To do this, yes, they use bots and basically try to do the following:

1. MEV exploitation: Validators can deploy MEV bots to capture additional value by strategically ordering transactions within the locks they validate.
2. Gas Optimization: bots can be used to efficiently manage gas prices, ensuring that validators maximize their returns from transaction fees.
3. Arbitrage Opportunities: Validators can use bots to identify and exploit arbitrage opportunities on different decentralized exchanges, increasing their profitability.

Ethical Considerations

While the use of bots by validators can increase efficiency and cost-effectiveness, it also raises ethical concerns about fairness and market manipulation. It is up to the validators how far they compromise the integrity of the ecosystem.

However, bots is a necessary part of the ecosystem as well as whales that can help many projects.

Conclusion

The bots provide automation and efficiency but can also be on the lookout for new tokens, while whales bring very high volatility to the market. By taking advantage of tools such as those offered by Smithii you can choose to avoid the actions of both.