Tradingbot won and lost more than $1 million worth of ethereum in 1 night

If there is one thing that is difficult for us humans, it is actively trading in financial markets. There is an incredible amount to take into account, everything can go wrong and you also have to keep a cool head. Luckily they invented bots for that. But emotionless algorithms aren’t everything either. One bot recently stole $1 million worth of ethereum (ETH), but also lost it all in one night.

Hugely Profitable Ethereum Trade

That writes Flashbots product manager Robert Miller on Twitter. This company deploys so-called MEV bots to meet the demand and supply of ETH tokens on the protocol. Since the merge upgrade, Flashbots services become very dominant in the ecosystem.

The protagonist in this story is 0xbaDc0dE, a bot that got its name from the contract of the mempool in which he is active. The story begins with a trader who wanted to sell $1.8 million worth of cUSDC (Compound USDC) tokens on Uniswap v2. Due to sky-high spreads, he only got $500 million back.

But to the one his death is to the other his bread. The huge spreads were a global opportunity for this bot to earn a huge amount of money. These so-called arbitrage bots earn returns by narrowing asset spreads between platforms so that traders can get a fair price. Because the spread was so huge, this bot managed to get hold of $800 million in ether ETH as compensation. Because the liquidity of cUSDC is not as great as with the largest tokens, many different protocols were used.

Activist hacker steals everything

But just an hour later, this entire amount was stolen because the smart contract was not secured well enough. This allowed the hacker to flash loan to claim all wrapped ETH (WETH) and move it from the pool to another contract.

The hacker let in know a transaction hash that he did it on purpose, as Ethereum validators are censored through the same infrastructure of Flashbots. That’s because Flashbots provides software that complies with the sanctions imposed by Tornado Cash. This allows Ethereum transactions in general to be easily censored.