Beginner’s Guide to Crypto Trading Bots — Part 16 — Gas Fee Arbitrage Bot

The Gas Fee Arbitrage Bot

C.W.Morton

Jun 26, 2024

Source : Straico AI. Prompt : ETH Gas Fee Trading bot playing card

The Gas Fee Arbitrage Bot

Profile
Best for : All Markets
Profit Expectation : High, Short Term
Risk : Moderate to High (dependent on the chosen crypto itself, and your software/hardware/code)

This is a niche one. Some rather ingenious bot traders figured out that an entirely new kind of arbitrage can be accomplished by spotting different trading fees on different platforms, and taking advantage of the difference between trading fees to accumulate profit.

Example: An ETH bot that is designed to find wide differences in ETH gas fees on different exchanges, then seeks to buy / sell moving funds between those exchanges with the intent to keep the difference in Ethereums wildly variable transaction fees.

This can be fractional — mere cents all the way to a few dollars per transaction — but if the system has the speed and connection to execute hundreds of fruitful transactions in a day, this can add up quickly.

This is one of the few ways to consistently generate profit regardless of the asset price or market condition. But it is not without big challenges.

Because “gas” is essentially a bidding system with higher gas transactions being given priority by the blockchain, this becomes a complicated little sub-world of crypto arbitrage. You are seeking to enter with the lowest gas bid possible that can still execute ahead of the people you are competing with.

Advantages of a Gas Fee Arbitrage Bot

Stable profits no matter the market condition: These bots are opportunists and they only seek pride differences in transaction fees, and are not depending on price flux of the asset itself.

Disadvantages of an Gas Fee Arbitrage Bot

Requires Top Hardware and Fast Internet Connection: Just like with standard Arbitrage, you are competing against the real pros with servers, custom coded bots, and T1 internet connections. You cannot always run arbitrage of any kind very profitably if you aren’t on the latest hardware and fastest connection.

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