Bots are engaging in a high-stakes game of cat and mouse within the wild world of Ethereum layer 2 tokens, aiming to outmaneuver each other and capitalize on the frenzy surrounding meme coins.
GK, a meme coin trader, took to X (formerly Twitter) to reveal the emergence of bots front-running other bots in a bid to exploit opportunities within the realm of meme coin trading.
The modus operandi involves a bot strategically deploying a small capital into a liquidity pool for trading newly-launched meme coins on Base, the Coinbase-operated layer 2 atop Ethereum’s layer 1 blockchain. These bots await the detection of their liquidity deposit by ‘launch bots’, which interpret it as a signal of a new coin launch and subsequently add more liquidity.
Hahahaha
— GK 🗿 (@Grypto_GK) March 21, 2024
there's a guy on Base launching the most low-effort shitters, adding .8e of liq, then rugging for ~1e around 10min later
over, and over, and over again.
At first I was pissed but then I realized he's stealing money from launch bots, and it's quite funny pic.twitter.com/hBoPiKjsea
Degenerate meme coin traders
Apparently, the strategy of front-running front-runners works well on Base. It might also work well on other fast, cheap blockchains. The ‘front-run the front-runners’ strategy is straightforward.
- First, thanks to Base’s fast, cheap operation, low-effort creation of altcoins is easy. This allows anyone to copy a smart contract, tweak a few parameters like ticker symbol or supply, and create their own meme coin in seconds.
- Second, at least while meme coins are a hot category, Base is still popular enough to attract front-running ‘launch bots.’ These launch bots scan blockchains and their layer 2s for signs of promising meme coin launches — including, to their peril, fake meme coin launches with honeypot liquidity.
- Finally, after the front-running bot has rug-pulled the launch bot, a few retail traders might still occasionally buy after both bots have traded, providing a final source of exit liquidity via a long-term rally.
However, the clever twist occurs when the original bot swiftly sells into the additional liquidity, effectively front-running the attempted front-run by the launch bot, resulting in a sophisticated game of cat and mouse within the meme coin trading ecosystem.
This tactic has primarily targeted meme coins with quirky names such as asdfasdf, epitomizing the carefree and degenerate ethos prevalent among meme coin traders. Meme coins, characterized by their whimsical mascots, often attract traders embracing their own brand of degeneracy.
Front-running meme coins
The ‘front-run the front-runners’ strategy thrives on Base’s swift and economical transactions, coupled with the ease of creating altcoins. This environment fosters a breeding ground for innovative trading maneuvers, perpetuating a cycle of exploitation within the crypto token offerings sphere.
While Coinbase champions Base as a cost-effective and developer-friendly layer 2 solution for Ethereum, it remains to be seen how the platform’s decentralized aspirations will unfold, especially given its current emphasis on Coinbase products.
Nevertheless, as GK’s revelation underscores, the world of meme coin trading is fraught with risks and opportunities, where even the most sophisticated trading strategies can become subject to exploitation. Amidst the chaos, traders continue to navigate this volatile landscape, fueled by the allure of potential gains and the thrill of outsmarting their competitors.