Original compilation: 0x137, Rhythm BlockBeats
Original compilation: 0x137, Rhythm BlockBeats
This article is based on the opinions published by encryption enthusiast Wazz and Cats Capital partner meows.eth on their personal social media platforms. Rhythm BlockBeats organizes and translates them as follows:
Fees.wtf is a dApp that, when connected to your Ethereum wallet, tells you how much you have spent on Ethereum gas fees. The protocol follows the model that SOS and GAS etc. started by issuing free airdrops.
WTF is a newly released dApp Token on Ethereum, but "WTF" may have become the most frequently spoken sentence by people who bought Token this morning. The WTF airdrop this morning was nothing short of a massacre. Although not a rug-pull, some MEV robots have stolen over $100,000 in profits like bandits due to mishandling by the team.
Let's see what happened.
First of all, we need to understand what is a liquidity pool (LP). It is how the DeFi protocol works, individuals can add liquidity to a specific trading pair (Pair) (WETH - WTF in this case) to allow buyers and sellers to conduct quick transactions, while LP participants can earn a certain Proportional protocol transaction fees are used as incentives.
Of course, people may be able to withdraw this liquidity at any time, but one of the risks faced is the so-called "impermanent loss" (Impermanent Loss). Simply put, liquidity providers may withdraw funds from the pool that are worth less than what was originally provided.
When WTF was released, developers added a certain amount of WTF liquidity to the pool. Specifically, they added 2211.46 WTF.
However the team barely added WETH (0.00001 ETH)
Immediately afterwards, a robot that intends to drain the liquidity pool began to operate, and a robot purchased 2211.45 WTF from the pool at a price of 2 ETH. This caused the price of WTF to skyrocket, while other addresses trying to buy the remaining 0.01 WTF paid increasing fees.
By this time, the WETH - WTF trading pair had accumulated dozens of ETH due to bot buying, and there was almost no WTF left in the pool, which meant that selling any amount of WTF would be hugely profitable.
We can look at the details of this process in detail:
One address first purchased "a little bit" of WTF (worth 10 ETH at the time).
This address then sent a super-fast transaction at 3000 gwei in the next block, selling their previously purchased WTF for nearly 6x the original price, successfully withdrawing 58 ETH from the WETH - WTF pool liquidity.
Eventually the liquidity pool becomes fully tilted. And when the robot is sniping liquidity, some users who are too FOMO are still spending a lot of ETH to buy a smaller and smaller amount of WTF.
For example, this address bought 22 ETH and only bought 2.34 WTF.
Subsequently, more liquidity was added to the pool and MEV bots (specifically MEV Bot: 0x000...B40) started attacking thousands of users at once.
For example, a robot used a $2.7 million Flashloan to squeeze $2,000 from an address through a sandwich attack. In the end, this address only bought about 0.0000000019 WTF (Rhythm calculated that the user bought WTF at a unit price of nearly 1.04 billion Dollar).
As of now, the price of WTF is hovering around $0.20. In my opinion, this is all caused by the MEV bots, each trying to drain the nascent liquidity pool as fast as possible, hurting each other in the process. It was a zero-sum game, and in the end the robot mentioned above won.
What lessons can we learn from this?
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