Takeaway

Blockchains with very low transaction costs often see increased activity from trading bots. On January 7, 2022, Polygon experienced intermittent downtime due to a “high level of activity, mainly from bots farming on some DeFi apps” (source: Polygon Official Twitter and The Economic Times).

Polygon hosts a larger share of bots (2.43% of active addresses) compared to Ethereum (0.37%) and Binance Smart Chain (0.18%).

Bots can be used in malicious ways to perform denial of service attacks. They can also perform useful functions such as maintaining correct asset pricing on decentralized exchanges. Blockchains with low transaction fees need robust architecture capable of resisting or adapting to intentional attacks from high frequency trading accounts.

Using the same methodology, there were 33,640 bots on Ethereum during the last sixty days. This represents 0.37% of all addresses having completed transactions during the period. It is possible that Ethereum’s high transaction fees reduces the incentive to conduct high frequency trading activity on the network.

Finally, let’s observe bot activity on Binance Smart Chain.

Blockchains with low transaction costs sometimes attract high frequency trading bots. For example, Solana has experienced downtimes in periods of overwhelming bot trading activity.

High frequency traders (a.k.a. Bots) can perform a useful service to a blockchain. When trading on Automated Market Makers such as Sushiswaps, bots can correct pricing discrepancies that can arise in trading pools. On the other hand, when trading fees are negligible, bots can also be unleashed to conduct a denial of service attack on a blockchain.

In this dashboard, I measure activity from high frequency traders on Polygon. I also compare the ratio of bots on Polygon, Ethereum and Binance Smart Chain.

During the last sixty days, close to 55,000 addresses were categorized as high frequency traders. These addresses completed more than five transactions in a single minute at least once within the last sixty days. This represents 2.43% of addresses having transacted during the period.

How does this compare with bot activity on other blockchains?

Definitions and Methodology

Bots are addresses that have completed more than five transactions per minute at least once in the last sixty days.

The terms bots and high frequency traders are used interchangeably.

It is important to note that block times differ between Polygon (~2sec), Binance Smart Chain (3 sec) and Ethereum (12 sec).

Within the last sixty days, only 769 addresses have completed more than five transactions in a single minute on Binance Smart Chain (BSC). This is surprising considering BSC’s low transaction fees.

Only 0.18% of addresses on BSC were considered bots.