How are arbitrage bots so fast?

Question

I built a system to monitor token prices on a given EVM blockchain. I monitor the token prices on several decentralized exchanges (DEX) by looking at the reserves of tokens for pairs of tokens.

To achieve that, I perform the following steps:

• Track the "Sync" events on the pairs when a new block is mined
• When a "Sync" event is detected on a pair, fetch the reserves for this pair
• Look at all the pairs involving the same tokens (from other DEX)
• Find gaps in prices
• Compute an arbitrage

This process typically takes ~200 ms. This is kinda fast, considering there is some I/O involved. However while running this system, I noticed that profitable arbitrages (i.e: gain from arbitrage + gas fess > 0$) typically stay open for ~300 ms.

And I wonder: how is it possible to close an arbitrage that fast? Am I missing some piece of information?

I would like to know if "fast" arbitrage bots use a specific technique to detect arbitrage opportunities and perform transactions, or if they are just faster. For example:

• Do they use the pending transactions to compute the pair reserves in advance to have a transaction ready earlier?
• Is a smart contract trading on their behalf, or are the transactions computed by a machine and then sent to the blockchain?
• Do they use flashbots to make their transactions faster?

Answer 1

Hello dear friend old post but let me give you my knowledge about this :

• Scan on every new block the token price or LP token price from Dexes
• If difference calcul it to avoid gas cost
• Make bool
• Execute arbitrage
• Have Full node
• Of course you can scan pending Tx to know the impact into the reserve etc ... ;)
• Solidity is needed for best result ;)