Tesla changes mind on BTC, Binance under investigation, Grayscale hits new low
Alchemix launch sniped on SushiSwap
OKEx Insights examines how bots were able to "snipe" the launch of ALCX on SushiSwap — and if anything can be done in the future.
Despite the continued pullback in the wider cryptocurrency market, the decentralized finance space recovered this week. The total value locked in DeFi protocols rose by 15% and stands, as of the time of this writing, at $39.1 billion. Additionally, the total borrowing volumes of DeFi protocols — led by Compound — rose by 4.8% to $9.92 billion.
However, the weekly average trading volume of decentralized exchanges dropped by 7% to $2.4 billion, as of the time of writing. Uniswap continues to lead DEXs with a 39% market share. Curve remains its leadership as the largest liquidity pool this week, with its total value locked reaching $1.9 billion.
|Category||Key statistics||Amount||Weekly % change|
|Overall||Total value locked (USD)||$39.1 billion||15%|
|Market dominance (%)||Maker (16%)|
|Lending||Total borrowing vol.||$9.92 billion||4.8%|
|Market dominance (%)||Compound (43%)|
|DEXs||Weekly avg. trading vol.||$2.4 billion||-7%|
|Market dominance (%)||Uniswap (39%)|
|Yield farming||Largest liquidity pool||Curve ($1.9 billion)|
Alchemix launch steals spotlight over the weekend
Synthetic stablecoins stole the spotlight in the DeFi community over the weekend following the launch of Alchemix.
While there are a number of synthetic-asset protocols already on the market, Alchemix presents two key innovations to the DeFi community:
- A yield-backed stablecoin
- Automatic debt repayment
Users may first use DAI to mint a synthetic derivative, alUSD, at a 1:1 ratio. The deposited DAI is used to earn yield via Yearn vaults. The earned yields can be used to repay debt automatically.
The launch of Alchemix drew widespread attention — thanks, in part, to notable Twitter accounts such as loomdart and eGirl Capital. The total value locked in Yearn's DAI vault surged from 10 million to 60 million shortly after the protocol's launch.
How bots "snipe" token launches on DEXs
The Alchemix team launched the ALCX/ETH liquidity SushiSwap pool on Feb. 27. However, part of the community was not pleased with the listing — with some suspecting that someone was aware of the token listing in advance and used so-called "sniper bots" to game the launch.
DeFi focused website DeFi Prime also shared a similar suspicion on Twitter after noticing that a bot had purchased half of the supplied ALCX tokens in the same block as the liquidity was added on SushiSwap. At block height 11937850, 320 ETH and 32,000 ALCX were added to SushiSwap's liquidity pool. In the same block, 300 ETH were swapped for 15,459 ALCX.
Alchemix's pseudonymous co-founder Scoopy Trooples admitted that the protocol suffered from a sniper bot attack, telling OKEx Insights that people set up bots in the mempool and retrieved transaction information, such as gas usage.
A common strategy for those deploying such snipers is to buy a token in the same block where a liquidity pool is created on decentralized exchanges, such as Uniswap and SushiSwap. This means that the bot is able to "snipe" the token at the price floor. It can then sell the tokens to other marketplaces for instant profit.
In the case of Alchemix, the token's ticker was known in advance and the bots were actively scanning the mempool, allowing them to buy the moment of its listing. Scoopy Trooples told OKEx Insights that the sniping bot is just a "very lucky sniper":
"Considering the fact that we didn't leak the launch info to anyone in advance, we believe that it was a very lucky sniper who was responsible for buying ALCX the same block the pool was created."
Twitter user "asynctomatic" stated that sniping is a common practice in the DeFi sphere and the incident was not Alchemix's fault. The user cited the example of ROOM's listing on Uniswap while observing that multiple bots tried to take advantage of the ROOM listing. However, only the fastest bot won and the others saw their transactions reverted. Yearn core developer "banteg" shared similar views while claiming that he, himself, had tested similar bots in the past.
While bot-driven sniping is common in the DeFi sphere, Scoopy Trooples believes that there is no perfect solution to preventing them. She elaborated that pausing the transfer of ALCX token or making public announcements on the token launch could still not prevent the bots from taking advantage of the token launch.
Despite there being no perfect solution against sniping bots, the Alchemix co-founder promised to do better if and when they conduct any future token launches. She told OKEx Insights:
"We will try to use the best available solutions to prevent it from happening again. Alchemix is not audited but our code was reviewed by several respected Solidity engineers. In addition, we have a $50,000 bounty with Immunify and we are planning to engage with auditors soon."
OKEx Insights presents market analyses, in-depth features and curated news from crypto professionals.