How to use efficient Mempool service to profit from DeFi?

What is Mempool (memory pool)

Mempool is a group of Ethereum transactions that have been broadcast to the network and are waiting to be packaged into blocks. Mempool service can directly track the life cycle of transactions. When the transaction is broadcast to the node by the user, it will wait in the Mempool, and then the transaction will be packaged into a block or abandoned by the network. A good Mempool service will monitor every transaction that exists in this process for you. You can learn more about Mempool here.

How is Mempool used for DeFi transactions?

Traders analyze the Ethereum Mempool to greatly increase the chance of obtaining MEV (miner extractable value). There are many different types of trading strategies that Mempool can apply. Some of these strategies involve looking for trading opportunities that didn’t exist. Therefore, since these Mempool services entered the market, the DeFi transaction ecosystem has undergone tremendous changes.

  • Front running: Determine the Gas price required to win the Gas auction.
  • Back running: According to the transaction result of another user, predict the transaction opportunity and pack it into the future block.
  • Sandwiching: predicting trading opportunities, by pushing another user’s trading opportunities to the maximum slippage limit, thereby predicting future blocks, which will lead to arbitrage opportunities at a later time (usually within the same block).
  • Generic predator (predator): hijacking transaction calls, hoping to run Gas auctions in Front running to obtain MEV (miner extractable value). This is usually done by replacing the address of the original trader with the address of the Predator and submitting a new transaction at a higher Gas price.

Contestant

Although the companies and products we discuss below provide a variety of products and services, the focus of our discussion this time is their Ethereum Mempool function.

BloXroute

BloXroute is a blockchain acceleration network (BDN) that uses a global server network to optimize network performance. They invested a lot of resources to build network infrastructure for Ethereum DeFi traders and builders. You can learn about their development on their blog. Their Mempool feature is called “Subscribe to NewTX Stream” and can be found on their product pricing page. There you will find various other useful features, many of which will help you build a more powerful DeFi product and gain trading advantages in the market.

Blocknative

Blocknative operates a global Mempool data platform that spans Bitcoin and Ethereum. They specifically provide Mempool services for Ethereum DeFi traders and builders. You can read their latest development on their blog. Their Mempool feature is called “Mempool Browser”, and you can find relevant information on their products.

Alchemy

Alchemy will provide basic Bitcoin and Ethereum node facility services. They provide a very convenient API endpoint for Ethereum DeFi traders and builders. Their Mempool function is called “alchemy_newFullPendingTransactions” and can be found in their documentation.

Performance benchmark

We have used these three services extensively in DeFi transactions and have seen huge differences in their performance. Below is an overview of the performance test results and all the data obtained, where performance is measured in milliseconds of delay. We connect all three services to our keeper robot and monitor Uniswap’s router contract, and record the time when each service reports incoming transactions. Once recorded, this information is mapped out and made available to the public.

Why is it important to have the fastest Mempool service?

The above experimental results show that the trader’s choice of Mempool service directly affects their profitability. According to data from ethstats.net, the current Ethereum block time is only 13 seconds on average. 180ms behind, or worse, more than 1000ms will greatly reduce your trading profit and reduce the possibility of transactions being packaged in the next block. At the same time, lag will reduce your reaction time in the Gas auction.

Comparison of Websockets and Webhooks

It is worth comparing the two event delivery methods used by these Mempool services. Technically speaking, Websocket should be faster, but its reliability may be slightly worse. Using Websocket connection, the client may miss an event when disconnecting. When using Webhooks to connect, each Mempool event you receive has its own network connection, which pushes events for each Mempool event. This may add a small amount of latency overhead, but it also adds some reliability. It is worth mentioning that traders may prefer lower latency, while DeFi product builders may prefer relatively reliable.

Best performance and redundancy solution

If you are a trader and want the best of both worlds in terms of performance and reliability, here are some redundant solutions that might work for you.

price comparison

All price comparisons are based on 2020–12–4. Please note that the feature list and price structure of each service are variable at any time.

Use these services VS to operate your own nodes

Generally speaking, it is not difficult to run and maintain your own node, especially if you simply use it for Ethereum calls. However, Mempool is a different way of operating. In the early days of Mempool transactions, traders will obtain Mempool information from their own nodes. This is where the competition is fierce. Whoever has a better Mempool infrastructure will have a slight advantage over others in every trading opportunity. And when you multiply this weak advantage by the hundreds of daily trading opportunities, you will have a huge advantage.

in conclusion

BloXroute is undoubtedly the best Ethereum Mempool service, suitable for automated DeFi traders of large-scale transaction operations. Not only do they provide the lowest latency, but they also have the most friendly rate limit (almost none) and reasonable prices. And although we believe in your own nodes, most traders are unlikely to operate their Mempool infrastructure as low-cost and high-performance as BloXroute.

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比特币新闻 — 区块链新闻

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