Whether executing algorithmic trades of memecoins or racking up transactions in anticipation of airdrops, bots are everywhere in crypto today.
These automated programs operate with speed and precision far beyond human capability, tirelessly performing their programmed functions 24/7.
However, the benefits these crypto bots bring for their owners come at the expense of genuine traders and blockchain users. Their inhuman speed and accuracy create significant disparities in the market, leading to an uneven playing field.
Magazine has even observed crypto bots that create and launch new memecoins on Solana while automatically pulling liquidity from older coins to rug users.
How crypto bots manipulate memecoin markets and airdrops
Rampant bot activity also causes severe congestion on blockchain networks, resulting in higher transaction fees and slower processing times.
Solana, which overtook Ethereum in fee revenue this week, experienced firsthand how bot activities degrade genuine user experience during this year’s memecoin craze.
Solana memecoins top the crypto narratives of Q2 2024. (CoinGecko)
The blockchain experienced severe congestion issues, with as many as 75% of transactions failing.
“These thousands of meme tokens launched on Solana. It’s all automated, and it’s 100% impacting people,” Ganesh Swami, CEO of data infrastructure firm Covalent, tells Magazine.
“Forget the economic value here — [the network] just becomes unusable.”
The situation worsened to the point that Solana developers had to release an update in April to address the congestion.
Though recent trends have brought Solana to the spotlight, the problems caused by bots aren’t unique to the network. It is a widespread issue affecting any profitable crypto trend.
The rise of MEV: Crypto bots extracting billions from Ethereum transactions
A popular use of bots is for maximal extractable value,…
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