Trading Bots: An Alternative Survival Strategy for Decentralized Exchanges (DEXs)

Introduction

Since the fourth quarter of 2023, the cryptocurrency market has entered a clear bullish phase, accompanied by a significant surge in the Meme token market. These tokens have demonstrated immense short-term value growth potential, attracting a large number of investors. However, the Meme token market is also characterized by extreme volatility and brief market cycles, with some tokens’ active trading periods lasting less than 10 minutes. Due to technical factors such as blockchain network congestion and operational speed limitations, trades often need to be executed within seconds, increasing the risk for investors, particularly those buying at market peaks. In response to these challenges, Decentralized Exchange (DEX) Trading Bots have emerged, designed to meet the demands of rapid trading and mitigate Maximum Extractable Value (MEV) losses.

With major exchanges like Binance launching related products, such as Banana, the DEX Trading Bot sector has quickly garnered market attention. Analysis shows that these tools not only perform well in terms of usage but also exhibit strong profitability and have accumulated a large number of active users. The DEX Trading Bot space, with its broad user base, clear application scenarios, and significant profit potential, is becoming an emerging field worth close attention in the cryptocurrency market.

What is a DEX Trading Bot?

A DEX Trading Bot is an automated trading tool specifically designed for DEX traders, primarily to optimize the trading experience. These bots can perform various functions, including but not limited to automatic order placement, portfolio management, and setting stop-loss and take-profit levels. DEX Trading Bots operate 24/7, continuously monitoring and trading in the cryptocurrency market, thereby increasing the likelihood of capturing favorable trading opportunities.

These bots execute automated trades through smart contracts, requiring no programming skills from the user. Modern DEX Trading Bots also support cross-chain trading and multi-platform operations. They offer a range of strategies, such as arbitrage, copy trading, and grid trading, helping users find the best profit opportunities across different markets.

Furthermore, DEX Trading Bots can execute more complex trading operations via automated APIs, such as limit orders, market orders, and order cancellations. These powerful automated tools significantly enhance trading efficiency and profitability, making them particularly suitable for users seeking to trade efficiently on decentralized exchanges. They are especially useful for those looking to chase “dog coins” and Meme tokens on-chain.

Services Offered by DEX Trading Bots

DEX Trading Bots have gained widespread acceptance among traders due to the extensive range of services they offer, surpassing the functionalities provided by traditional decentralized exchanges (DEXs). Based on the analysis of several top-ranking DEX Trading Bots in the market, the key services provided by these bots include:

Automated Trading

Automated trading is one of the core services provided by DEX Trading Bots. It allows users to execute trades automatically, saving time and effort. Instead of manually monitoring the market and executing trades, users can set their trading strategies and conditions, and the bot will automatically execute trades based on these parameters.

This approach helps traders better capitalize on market movements and seize trading opportunities in a timely manner, while also reducing the impact of human emotions on trading decisions. By utilizing automated trading through DEX Trading Bots, users can more efficiently manage their investment portfolios, enhance trading efficiency, and minimize losses due to negligence or emotional decision-making. Thus, the automated trading feature of DEX Trading Bots offers a more convenient and efficient way to trade, helping users optimize their trading experience and improve outcomes.

Enhanced Trading Experience

To further enhance the trading experience, DEX Trading Bots offer features such as stop-loss, take-profit, and trailing stop orders. These tools help traders more accurately control risks and secure profits. Whether for short-term trades or long-term investments, DEX Trading Bots provide effective decision-making support.

Leveraging smart algorithms and real-time market data analysis, DEX Trading Bots assist traders in making more rational trading decisions, reducing the likelihood of emotional trading behavior, and thereby increasing the success rate and profitability of trades.

Sniping Functionality

The sniping feature provided by DEX Trading Bots refers to the ability to quickly purchase or sell assets at specific times, such as during token launches or presales.

This functionality enables the bot to rapidly execute trades at precise moments to capture the best opportunities in the market. In volatile trading environments, the sniping feature can help investors seize optimal trading moments, leading to better investment returns. By reacting swiftly to market changes based on pre-set conditions and strategies, DEX Trading Bots maximize the use of market volatility, providing more trading opportunities and profits. For investors, the sniping feature is a crucial tool that enhances trading efficiency and accuracy, allowing them to better capture market opportunities and achieve superior investment returns.

One-Click Copy Trading

DEX Trading Bots allow users to select one or more trading entities — such as high-performing accounts or trading bots — that they believe have a high success rate. These entities can then be added to a watchlist within the DEX Trading Bot. The bot will automatically and in real-time follow the trading behaviors of these selected entities. Whenever a followed entity executes a trade, the DEX Trading Bot will immediately replicate that trade, automatically executing each instruction.

This feature is particularly beneficial for users who lack the time or expertise to conduct thorough market analysis, as it allows them to improve their trading success rate by leveraging the strategies of more experienced traders.

Limit Orders and Dollar-Cost Averaging (DCA)

DEX Trading Bots also offer advanced order types like limit orders, which can be set to partially fill, allowing users to receive tokens for the portion of the order that gets filled. When placing a trade, the bot can optimize the order by selecting the best route, setting the order’s duration, exchange rate, and quantity, thereby maximizing the trade’s benefits. This helps users conveniently avoid increased costs and slippage issues due to price impact during trades, as well as mitigate MEV concerns.

Moreover, DEX Trading Bots have integrated DCA (Dollar-Cost Averaging) investment products, allowing users to schedule regular, fixed-amount investments over a period, helping to lower the average purchase price to within their desired range. This method helps investors reduce the risk of investing at a single price point in a highly volatile market. Users can simply set their purchase frequency, price range, total duration, and desired cryptocurrencies. Once activated, the bot will automatically execute the trades based on the pre-set parameters, transferring the purchased tokens to the user’s account linked to the bot. Upon completion of the DCA plan, the tokens will be automatically transferred back to the user’s wallet.

Classification of DEX Trading Bots

DEX Trading Bots can be categorized into three types based on their revenue models:

Subscription-Based Model

In the subscription-based model, users are required to pay a subscription fee before gaining access to the DEX Trading Bot. Typically, the fee ranges around 0.1 ETH per month or 1 ETH per year. This model is often preferred by smaller communities or niche groups. A common user base includes followers of high-performing Key Opinion Leaders (KOLs) who use the bot to guide their followers. Users can replicate the KOLs’ trades through the copy trading function.

Transaction Fee-Based Model

DEX Trading Bots that charge transaction fees operate similarly to DEXs, with fees applied each time a trade is executed via the bot. The standard fee is generally around 0.5% to 1.5% of the transaction amount. These fees are in addition to the fees users pay on the DEX itself, resulting in double charges. However, many DEX Trading Bots distribute a portion of their revenue to token holders, creating a positive feedback loop and maintaining a healthy ecosystem. Projects that do not issue tokens do not redistribute their revenue.

Hybrid Model (Subscription and Transaction Fees)

Some DEX Trading Bots combine both subscription fees and transaction fees. Typically, these bots offer additional premium services or features. For instance, the Maestro project generates revenue primarily from transaction fees, charging 1% of the transaction amount. Since Maestro does not issue tokens, all revenue is retained as protocol income and not distributed to users. However, Maestro provides a VIP community service, where users pay $200 per month to join. Within this VIP community, members can access carefully selected Smart Money addresses or profitable strategies, similar to traditional KOLs’ paid groups.

Analysis of DEX Trading Bots

By examining the nature of DEX Trading Bots, it is clear that these tools are primarily designed for high-frequency trading, enabling users to gain an edge in fast-paced environments like Meme tokens or niche projects. As a result, most users of DEX Trading Bots are high-frequency traders. Given the per-trade fee structure, typically set around 1%, the revenue generated by DEX Trading Bots can be as substantial as that of some top-tier DEXs.

Advantages of DEX Trading Bots Over Traditional DEXs

The rise in usage and revenue of DEX Trading Bots in a short period is noteworthy, with some even nearing the revenue levels of top-tier DEXs. This phenomenon can be attributed to several key advantages that DEX Trading Bots have over traditional DEXs:

Rapid Response

DEX Trading Bots enable rapid execution of trades. Once the target price is triggered, the trade is executed immediately, eliminating delays that may occur with manual trading. This real-time trading capability significantly enhances efficiency and reduces risk. During periods of high on-chain trading volume, congestion can lead to delays, whereas DEXs often experience slowdowns due to chain performance limitations. DEX Trading Bots, with their efficient trading mechanisms, ensure swift execution even amid network congestion. This is particularly advantageous for users needing to make quick trades, such as those involved in buying newly listed or Meme tokens. The instantaneous response capability of DEX Trading Bots allows users to seize market opportunities quickly and maximize returns.

Automated Trading

Given the 24/7 nature of the crypto market and its rapid changes, automated trading has become essential. Automation helps users capture market movements at any time and saves significant time and effort. Traditional manual trading requires investors to spend hours monitoring the market and executing trades. In contrast, automated trading liberates investors from these tasks, allowing them to focus more on market analysis and strategy development. This not only improves trading efficiency but also helps investors better gauge market trends and make more informed decisions.

Reduced MEV Losses

One major challenge with traditional DEX trading is MEV (Maximum Extractable Value) attacks, which can lead to significant losses. While many DEXs have attempted to address MEV attacks, the results have been mixed, and such attacks can be particularly damaging when they occur during the initial purchase of newly listed tokens. Traders often need to set higher slippage to ensure successful trades. DEX Trading Bots, however, employ technology to effectively mitigate MEV attacks. By paying a fee of around 1%, users can save on slippage costs, which often exceeds the fee paid, thereby significantly reducing trading costs.

High Flexibility

DEX Trading Bots offer high flexibility, allowing users to customize trading strategies and parameters according to their needs. This adaptability enables each user to optimize their trades based on personal investment strategies and risk preferences. Customizable settings help users better adjust to market changes, improve trading efficiency, and manage risk more effectively. The flexibility of DEX Trading Bots caters to diverse investor needs and preferences, providing a more personalized trading experience. In a constantly changing market, this flexibility is crucial for enhancing trading competitiveness and adaptability.

Enhanced User Experience

Compared to traditional DEXs, DEX Trading Bots offer a superior user experience. They provide convenient cryptocurrency trading, monitoring, and analysis tools that significantly enhance user convenience. By integrating with various platforms, users can easily trade cryptocurrencies, monitor market trends in real-time, and conduct in-depth data analysis to make informed decisions. DEX Trading Bots streamline the trading process and offer comprehensive market information and analysis reports, allowing users to better understand market trends and risks, thereby improving trading success rates. Additionally, these bots offer various tools and features, such as automated trading and quantitative analysis, helping users capitalize on market opportunities and achieve more stable and sustained returns.

Dex Trading Bot Data

Based on the latest data from Dune, the following analysis of Dex Trading Bot data is provided:

Trading Volume and Users by Chain

Trading Volume and Users by Chain(Data Source: Dune Analytics)

In terms of trading volume, Dex Trading Bots have a daily trading volume of $105.54 million. This reduction in trading volume is primarily due to the market crash on Monday, which led to a decline in on-chain trading volume. The data shows that trading is predominantly concentrated on three main blockchains:

• Solana: $74.78 million
• Ethereum: $20.15 million
• Binance Smart Chain (BSC): $1.57 million

Solana and Ethereum together account for 95% of the total trading volume.

Regarding user numbers:

• Solana has approximately 161,200 daily users.
• Ethereum has about 36,900 daily users.
• Base has around 10,200 daily users.

From the data, it is evident that:

• The average trading amount per user on Solana is relatively low at $463.
• On Ethereum, the average trading amount per user is $546.
• On Base, the average trading amount per user is $96.42.

User Trends

User Numbers Over the Last 180 Days(Data Source: Dune Analytics)

According to the chart data, the market has been in a broad fluctuation trend over the past four months, with a significant market crash occurring this Monday. In recent months, there haven’t been prominent market hot spots, leading to a stable number of daily on-chain users, which has been maintained between 58,000 and 60,000.

However, during market uptrends, user growth accelerates significantly. For example, on March 18th, the number of daily users reached 120,000. This indicates that the usage of Dex Trading Bots is closely linked to market activity levels. When the market is on an upward trend and there are numerous hot spots, the demand for Dex Trading Bots increases substantially.

Trading Volume Trends

Trading Volume Trends Over the Last 180 Days(Data Source: Dune Analytics)

From the chart, it can be seen that there is a certain correlation between trading volume and user numbers for Dex Trading Bots. When market conditions are favorable, both trading volume and user numbers show an increasing trend. Conversely, when market conditions are poor, both trading volume and user numbers decline.

Comparing the data, trading volume peaked at $700 million, whereas it is currently around $100 million. User numbers peaked at 120,000, while it is now just over 50,000. This indicates that during favorable market conditions, existing users tend to increase their investment amounts or trading frequency, thereby driving the growth of trading volume. Therefore, during bullish market phases, the growth rate of trading volume will far exceed the growth rate of user numbers.

Bot Revenue

Currently, the total daily revenue of Dex Trading Bots stands at $1.641 million. The primary sources of this revenue are Photon, Trojan, BonkBot, Banana Gun, and Bullx. These five projects together account for 96% of the total revenue in the Dex Trading Bot sector. This indicates that the revenue levels for Dex Trading Bot projects are notably high, even during the current market trading downturn.

On March 18, during the peak of trading volume, revenue also reached its highest point, totaling $29.038 million per day. Among these, BonkBot alone generated $22.81 million in a single day, surpassing the revenue of any DEX or other projects in the market. Thus, it is evident that the revenue levels in the Dex Trading Bot sector are exceptionally high.

Representative Projects in the Dex Trading Bot Sector

From the table, we can identify the top five projects in the Dex Trading Bot sector as follows: Photon, BonkBot, Trojan, Banana Gun, and Sol Trading Bot. In terms of total trading volume, although Banana Gun is ranked fourth, its cumulative trading volume is very close to that of Trojan, which is ranked third. However, there is a significant gap between Banana Gun and Sol Trading Bot, which is ranked fifth. Therefore, we will focus on the top four projects: Photon, BonkBot, Trojan, and Banana Gun.

Photon

Photon is a Dex Trading Bot based on the Solana blockchain and currently ranks as the number one trading bot in terms of trading volume within the sector, with a cumulative trading volume of $9.987 billion. Its main features include:

• Memescope: Photon collaborates with Pump.fun and Moonshot to provide users with comprehensive information on various tokens before they make a purchase. Users can create and customize metrics that are important for their trading decisions and annotate the sources of each piece of information, offering greater flexibility and convenience.
• DCA Investment: Photon allows users to create DCA (Dollar-Cost Averaging) orders based on their investment plans and risk preferences. Users only need to input the amount they wish to buy or sell, the time interval between orders, the target volume, market cap range (min/max), and order expiration time (24/48/72 hours). Additionally, users can specify the priority and bribe amount for each DCA order.
• Limit Orders: Photon offers three types of limit orders: buy-the-dip, stop-loss, and take-profit. Users can set conditions based on MC (Market Cap) declines or increases or use Photon’s target lines and configure the timing settings.
• Smart-MEV Protection: Users have the option to select Smart-MEV during trades. If users wish to complete their trades quickly, they should choose this option, which offers bribe choices of either greater than or less than 0.0001 SOL per trade. If “greater than” is selected, the bribe will be used for every operation; if “less than” is chosen, the bribe will be used only when JITO accepts the trade order.

Photon’s primary function is to assist users in quickly purchasing tokens in the cryptocurrency market, while also offering additional financial services such as limit orders and DCA investment. Photon’s partnership with Pump.fun and Moonshot provides users with extensive token information. Users can securely purchase tokens listed on Ethereum and Solana. Photon sets a user trading fee of 1%.

BonkBot

BonkBot is a Dex Trading Bot developed by the Bonk community and currently ranks as the largest trading bot in terms of trading volume within the sector, with a cumulative trading volume of $7.59 billion. BonkBot is known for its user-friendly interface and its main features include:

• Simplified Trading Process: Users only need to paste the token address into a Telegram chat to execute a purchase immediately, without needing to connect a wallet or adjust slippage.
• High Performance and Efficiency: BonkBot is renowned for its speed and execution capability, allowing for quick buy and sell operations, which significantly reduces waiting times.
• MEV Protection: BonkBot collaborates with Jito Labs to provide advanced MEV protection features, which accelerate trades by default and defend against front-running attacks.
• Referral System: Through a referral mechanism, users can earn a portion of the trading fees as rewards, further incentivizing the use of the platform.

BonkBot is built on the Solana blockchain, which has been prominently driven by the issuance and popularity of Meme coins during this bull market. Given that Dex Trading Bots were primarily created due to Meme coins and “shitcoins,” BonkBot’s trading volume and user base have significantly increased. Supported by the BONK ecosystem, BonkBot has enhanced market influence and user retention. Additionally, BonkBot’s collaboration with Raydium has further improved its market performance and user experience. BonkBot sets a user trading fee of 1%.

Banana Gun

Banana Gun is a Telegram-based Dex Trading Bot and currently ranks third in trading volume within the sector, with a cumulative trading volume of $5.69 billion. Its main features include:

• Sniping Function: Banana Gun helps users quickly buy or sell assets at specific times, especially during project launches, to capture the best market opportunities. It assists investors in seizing optimal trading moments, thus achieving better investment returns.
• MEV Protection: Banana Gun offers advanced MEV protection features that accelerate trades by default and defend against front-running attacks.
• Maximum Spending: Banana Gun includes slippage control and limit orders in its trading packages. Users can set a maximum spending limit to restrict the amount of tokens and gas they are willing to use. For tokens with maximum trade volumes, the contract code limits the maximum amount that can be purchased in a single trade. If the maximum allowed trading volume is reached, any remaining ETH will be refunded to the user. If the trade cannot meet the maximum allowed volume, it will be automatically canceled.

Banana Gun is designed to help users quickly purchase tokens in the cryptocurrency market, particularly excelling in sniping operations at launch. Users can securely buy tokens listed on Ethereum, Solana, and Base chains and be the first to purchase new coins. Banana Gun sets a user trading fee of 0.5%.

Trojan

Trojan is a Dex Trading Bot built on the Solana blockchain and currently ranks fourth in trading volume within the sector, with a cumulative trading volume of $5.62 billion. Its main features include:

• One-Click Follow Function: Trojan can track up to 40 wallets simultaneously. Its one-click follow functionality is similar to other Dex Trading Bots but stands out due to its ability to track a larger number of wallets, providing users with more trading references.
• DCA Investment: Trojan allows users to regularly purchase cryptocurrencies in fixed amounts or quantities based on their investment plans and risk preferences, regardless of market conditions. This helps users spread investment costs, reduce the impact of market volatility, and avoid purchasing assets at market highs, thus optimizing their investments. Trojan’s DCA feature can automatically execute purchase operations.

Trojan was originally Unibot on Solana, developed by former Unibot community operations leader Reethmos. After its success, it was rebranded to Trojan. Trojan’s trading interface is similar to Unibot’s style. Trojan sets a user trading fee of 1%, which can be reduced to 0.9% through referrals.

Summary

Dex Trading Bots have emerged as a specialized trading avenue driven by the demand for participating in the launch of new tokens and Meme coins. These bots primarily cater to users who are interested in quickly buying new tokens and seizing opportunities with Meme coins. Over the past six months, data on Dex Trading Bot trading volumes and user numbers reveal that these bots have shown significant potential and appeal in the cryptocurrency market as efficient and convenient trading tools. Despite a notable decrease in data compared to peak periods, the overall health of the sector remains robust.

From the perspective of project revenue within the Dex Trading Bot sector, it is evident that these bots possess substantial earning power, often exceeding the revenue of top-tier DEXs during market highs. This strong financial performance provides project teams with ample motivation to continually innovate and enhance their offerings.

Looking ahead, Dex Trading Bots represent a concrete manifestation of intent-driven trading strategies. As the AI sector becomes a key focus for future development, it is expected that Dex Trading Bots will increasingly integrate AI technology to enhance their functionality and better align with the interests of traders. This evolution will likely lead to even more intelligent and user-friendly trading solutions.