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Following the announcement that BZRX token, the native cryptocurrency of DeFi project bZx, will be listed for trading on UniSwap decentralized exchange, reports suggest that a trader made more than half a million dollar within 30 minutes of trading the token.
How It Happened
On Monday evening, Security engineer Roman Storm took it to Twitter to explain how he spotted someone who made $1 million in a half-hour by trading the BZRX during an Initial DEX Offering (IDO) on UniSwap.
An IDO is the latest concept for fundraising in the cryptocurrency industry. However, unlike ICOs, IEOs, and STOs, Initial DEX Offerings have no accountability to a central party since they are conducted on decentralized exchanges.
According to Storm, who is also a crypto trader, the person waited for the BZRX announcement for UniSwap listing and then wrote a smart contract to purchase tokens on the DEX. The anonymous trader then spammed the Ethereum network to prevent other traders from buying the token.
After the liquidity transaction was processed in block 10451767, he became the first person to purchase the BZRX token with the help of his bot. This allowed him to open a long position at a very low price. On-chain data suggests he made a buy order of 650 ETH ($155,154) to get 1,966,111 BZRX, at the rate of 3024 BZRX/ETH.
Two minutes after his order was completed, he started selling the tokens in batches, ranging from 66,111 BZRX to 400,000 BZRX per batch. He sold 1,666,111 BZRX from his stash in 11 transactions, making between 52 and 741 ETH per trade.
It Wasn’t a Hack
The trader made a total of 2,780 ETH from the sales with a profit of 2,030 ETH ($509,431). He is left with a balance of 300,000 BZRX, which is currently worth around $48,290.
While some, especially the less technically inclined investors, may argue that the trader might have hacked or exploited the system, what he did was to leverage a trading bot to buy low and sell high for profit. Using DeFi bots and spamming networks to prevent others from immediately buying tokens during IDOs has become a common occurrence.
Storm said he was only trying to educate the community about the technical details of smart contract bots on Ethereum.
“The BZRX IDO today was not an exploit nor a hack. Uniswap IDOs generically still have problems with front running, and that’s all I’m trying to show. My intent was to teach the community about technical details of DeFi bots on Ethereum,” he said.
Founded in 2017, bZx is a decentralized protocol for tokenized margin trading and lending. Yesterday, the project unlocked a part of the tokens issued during its public sale. Earlier this year, the protocol was compromised following two attacks.
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