Win Your Next IDO Token Purchase — High Slippage Fix
by: Ryan Vartoogian, Product Manager
Win even in low liquidity, high slippage rate environments with new tokens
Crypto sharks are waiting to take a bite of your next transactions. This is the danger of slippage. New token releases present an enticing opportunity for exponential increases in the price during the initial hype phase of the new token or IDO. It’s a lot like what happens when a new restaurant opens and a line forms before anyone has even had the chance to try the food. The larger the transaction amount, the more likely you are to get frontrun by sharks.
The challenge is one of speed and the lack of liquidity which causes slippage rates as high as 50%. The good news is there is a solution. There is an increasing rise in IDO token launches on decentralized exchanges (DEX platforms). This is often seen as an alternative to paying the high fees and the long waiting period required when getting listed on a centralized exchange for an ICO listing.
How does an IDO listing happen?
The team behind the project works with a Decentralized Exchange (DEX) or Automated Market Maker (AMM) like Uniswap. They then create a liquidity pair to enable the purchase of the tokens and set the initial value based on the ratio of the token pair.
The team behind the project and DEX do the marketing and advertising which builds excitement leading up to the token launch. This creates a bit of a feeding frenzy with everyone wanting to get in first.
When a new liquidity pool is created on a decentralized exchange like Uniswap, traders can profit by being first to buy the new tokens and then often quickly sell them to new buyers as the price rises. This strategy is called sniping and the most important factor is being the first to buy the token as soon as the liquidity pool is added to the decentralized exchange.
Speed wins crypto
There are three core IDO trading factors to consider.
1. Purchase quickly before anyone else.
This can be achieved by identifying when the contract (or listing) is to be launched and aping into it first. This can be most effectively done with a network like bloXroute which provides pending transactions faster. The ability to see transactions in the mempool more quickly opens the door to be first to know when liquidity has been added to the decentralized exchange.
The bloXroute network also offers direct connections to mining pools which provides you the speed advantage to get your transaction mined faster.
The aim of a Token Sniper bot is to buy new tokens with a specified amount of ETH, with the aim of the price rising. The bot makes the purchase once it detects a PairCreated event (a new liquidity pool) on the decentralized exchange.
Always do your own research and make sure you’re dealing with a valid token and contract.
1. Is a valid (Uniswap /1 inch) or other router address being used?
2. Does a mint function exist?
3. Is it a potential honeypot (where you can buy tokens but cannot sell)?
2. Low liquidity, high slippage rate environments with new tokens.
This means that you need to provide a high threshold of what you might be expected to pay. This in turn provides the opportunity for sharks to take advantage of this trading gap. That is to jump ahead of you and buy the token at a lower price which will result in your price increase. This happens without you realizing it. Using bloXroute transaction protection allows you to avoid this frontrunning.
3. Reliable private transaction protection.
bloXroute is like a private delivery service that takes your transaction and purposefully hands it off to mining pools who do not broadcast it until it’s fully mined. This means that the sharks don’t have the opportunity to see your transaction until it is fully mined.
bloXroute is different from other private transaction services in that it provides dedicated un-crowded paths allowing you to get 100% of your transactions processed (on average within the first 1–3 blocks). With other alternatives (like Flashbots), your transaction might not land on the early block as you are competing over a small block space reserved for Flashbots. This is especially critical in NFT sniping strategies where there is a very small supply compared to the immense demand during a new NFT drop.
You can enable transaction protection easily (5 to 10 minutes)
It’s easy to add protection to your transactions whether you are a non-bot or a bot trader. The cost is 15% of the transaction fee depending on how many transactions you submit in a month. To use the service, you will create a bloXroute account and load the private transaction credits, which will be used to pay for the private transaction fees. You can then add the bloXroute Private Transaction Network as a custom MetaMask RPC or use bloXroute Cloud-API to submit the private transactions from your bot.
For more information and to get started, contact us on Discord or by email.