MEVbots explained

Maximum Extractable Value (MEV) bots scan the chain and look for transactions to "steal" assets from. There have been a number of approaches to hinder these Bots from operting on chain.

When a transaction moves through a liquidity pool, there is an oprotunity for slippage: where another transaction preceeds your transaction - changing the price, and effecting the amount of tao/alpha you receive.

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Example

An isolated transaction will have a small price impact due to the liqudity pool

But a large transaction in front of this one adds slippage:

In this example, 4% of the transaction is lost to slippage.

This is what the MEV bots do.

First fix: Limits

All transactions should set a slippage limit. This means - "hey, the price is x, and I am ok with a change of y% for the transaction."

The slippage limit should be small - a 4% slippage limit in the example above cost 20 alpha (~ 2 tao). For high liquidity subnets, you can be well below 1%.

The MEV bots calculate their MAX extraction on every transaction

f your limit is very loose - the bot may decide to attack your transaction.

If you have no limit set: The MEV bots can extract as much as they want.

MEVShield

While a tight limit price on your transfer should be enough to stop MevBots, the chain has also launched MevShield.

Currently in version 1.0: Mevshield encrypts your transfer, so that the MEVbot cannot read the details. ON the next block, your transaction is decrypted and processed.

Advantages:

By encrypting the transaction, the MEVBot cannot see what you have done, and tehrefor cannot schedule a transaction in front of your trade.

Disadvatages

Each transaction using MEVShield must be signed twice:

• Sign the transaction
• sign the encryption wrapper.

Taostats (and other providers) now offers the ability to sign the encryption wrapper to save double password entry.

MevShield 2.0 is in development with more enhancements.