mev-beta/docs/ARBITRAGE_DETECTION_GAP_ANALYSIS.md

MEV Bot - Arbitrage Detection Gap Analysis

Date: October 25, 2025 Issue: Zero arbitrage opportunities detected despite 6,840 DEX transactions Status: 🔴 CRITICAL GAP IDENTIFIED

---

Problem Statement

The MEV bot successfully processes blocks and detects DEX transactions, but ZERO arbitrage opportunities are being found across 5.5 hours of runtime and 80,143 blocks processed.

Expected vs Actual

Expected Behavior:

• Detect DEX transactions ✅
• Extract swap event data ❌
• Analyze price differences across DEXs ❌
• Identify profitable arbitrage opportunities ❌
• Log opportunities for execution

Actual Behavior:

• Blocks processed: 80,143 ✅
• DEX transactions detected: 6,840 ✅
• Swap events logged: 0 ❌
• Arbitrage opportunities: 0 ❌

---

Root Cause Analysis

1. Swap Event Files are Empty ❌

$ ls -lh logs/swap_events_*.jsonl
-rw------- 1 administrator administrator 0 Oct 24 05:18 logs/swap_events_2025-10-24.jsonl

Finding: Swap event files contain ZERO bytes despite detecting thousands of swaps.

2. Detection Pipeline Breakdown

[WORKING]   Block Processing → DEX Transaction Detection
              ↓
[BROKEN]    Swap Event Extraction → Swap Event Logging
              ↓
[NO DATA]   Price Analysis → Arbitrage Detection
              ↓
[RESULT]    0 Opportunities

3. Log Evidence

What's Working:

2025/10/24 19:36:14 [INFO] Uniswap V3 Swap event detected: Contract=0x2f5e87C9312fa29aed5c179E456625D79015299c
2025/10/24 19:36:15 [INFO] DEX Swap event detected in transaction 0xe3fd9e03ed...

What's Missing:

• No swap event details being logged to swap_events_*.jsonl
• No price comparison logs
• No arbitrage analysis logs
• No "analyzing swap for arbitrage" messages

Services Running But Not Processing:

2025/10/24 19:35:54 [INFO] Price feed started with 15-second update interval
2025/10/24 19:35:54 [INFO] 🔍 Market scanner created for arbitrage opportunity detection
2025/10/24 19:35:55 [INFO] 📈 Real-time arbitrage detection and profit analysis enabled

Final Results:

2025/10/24 19:46:12 [INFO] Final Statistics - Opportunities: 0, Executions: 0, Successful: 0, Total Profit: 0.000000 ETH

---

Technical Analysis

Swap Event Processing Gap

Expected Flow:

1. Monitor detects new block
2. Parser extracts DEX transactions (WORKING ✅)
3. Scanner identifies swap events (PARTIALLY WORKING ⚠️)
4. Swap events written to JSONL files (BROKEN ❌)
5. Price oracle fetches current prices (STARTED but NO DATA)
6. Detection engine compares prices (NO DATA to compare)
7. Opportunities identified and logged (IMPOSSIBLE without data)

Broken Link: Step 4 - Swap event serialization/logging

Configuration Status

Arbitrage Configuration (from config):

arbitrage:
  enabled: true
  min_profit_wei: 100000000000000      # 0.0001 ETH (~$0.20)
  min_roi_percent: 0.05                # 0.05% minimum ROI
  max_opportunities_per_event: 5       # Should process up to 5 per event

Resources Available:

• ✅ Pool data: 10 pools cached (data/pools.json)
• ✅ Token data: 6 tokens cached (data/tokens.json)
• ✅ Price oracle: Started with 15-second updates
• ✅ Market scanner: Created for arbitrage detection
• ❌ Swap event data: EMPTY

---

Impact Assessment

Current State

• Parser: ✅ 100% accuracy (validated)
• DEX Detection: ✅ 6,840 transactions found
• Swap Analysis: ❌ 0% (no data reaching analysis layer)
• Arbitrage Detection: ❌ 0% (impossible without swap data)

Missing Functionality

1. Swap Event Serialization - Events detected but not logged
2. Price Comparison - No data to compare across DEXs
3. Opportunity Identification - Cannot identify without price data
4. Profitability Analysis - Cannot calculate without swap details

---

Why This Wasn't Caught Earlier

1. Parser Focus: Previous audits focused on parser accuracy (100% validated ✅)
2. Edge Case Validation: Confirmed zero edge cases (100% success ✅)
3. System Stability: Bot runs without crashes (5.5+ hours stable ✅)
4. Health Metrics: High health score (99.90/100 ✅)

But we didn't verify: End-to-end arbitrage detection pipeline

---

Potential Root Causes

Theory 1: File Writing Permissions

• Swap event files created with 0600 permissions
• May have write errors that are being silently ignored

Theory 2: Swap Event Serialization Bug

• Events are detected but JSON serialization fails
• No error logging for write failures

Theory 3: Event Pipeline Disconnection

• Scanner detects events
• But events not passed to arbitrage analysis layer
• Missing connection between scanner → analyzer

Theory 4: Empty Event Data

• Events detected but contain no actionable data
• Parser outputs SwapDetails but critical fields empty
• Analysis layer rejects invalid/incomplete data

---

Evidence from Extended Runtime

5.5 Hours of Operation:

• 6,840 swap events detected
• 0 swap events logged
• 0 arbitrage opportunities found

Statistics:

• Average: 1,243 swap events per hour
• Expected opportunities (conservative): 5-20 per day
• Actual opportunities: 0

This suggests systematic failure, not just market conditions.

---

Recommended Investigation Steps

Immediate Checks

1. Check Swap Event Write Errors

   grep -i "error.*swap.*event\|failed.*write\|permission" logs/mev_bot.log
   

2. Verify Scanner → Analyzer Connection

   • Check if scanner is passing events to detection engine
   • Verify event channels are not blocking/dropping data

3. Check Swap Event Data Structure

   • Verify SwapDetails contain required fields
   • Check if token addresses, amounts, pools are populated

4. Review Arbitrage Analysis Code

   • Confirm it's receiving swap events
   • Check if it's filtering out all events (too strict criteria?)

Code Areas to Audit

1. pkg/scanner/concurrent.go

   • Swap event processing
   • Event logging to JSONL files
   • Error handling for write failures

2. pkg/arbitrage/detection_engine.go

   • Event reception from scanner
   • Opportunity identification logic
   • Logging of analysis attempts

3. pkg/market/price_oracle.go

   • Price fetching for detected swaps
   • Data availability checks

---

Impact on Production Readiness

Current Assessment

Parser & Stability: ✅ PRODUCTION READY

• Zero edge cases validated
• 100% parser accuracy
• Stable operation confirmed

Arbitrage Detection: ❌ NOT FUNCTIONAL

• Zero opportunities detected
• Swap event pipeline broken
• Cannot generate profits in current state

Revised Status

Overall Status: ⚠️ PARTIALLY READY

Working Components:

• ✅ Block monitoring
• ✅ DEX transaction detection
• ✅ Transaction parsing (100% accuracy)
• ✅ System stability
• ✅ Connection management
• ✅ Error recovery

Non-Working Components:

• ❌ Swap event logging
• ❌ Price analysis
• ❌ Arbitrage opportunity detection
• ❌ Profit generation capability

---

Revised Recommendations

Before Production Deployment

1. Fix swap event logging - Critical for arbitrage detection
2. Verify price comparison - Ensure multi-DEX price analysis works
3. Test arbitrage detection - Confirm opportunities are identified
4. End-to-end testing - Validate entire pipeline from block → opportunity

Testing Protocol

1. Create unit tests for swap event serialization
2. Integration test: DEX transaction → swap event → opportunity
3. Mock profitable scenarios to verify detection
4. Monitor with known arbitrage conditions

---

Realistic Expectations Revisited

Previous Expectations (from documentation)

• 5-20 arbitrage opportunities per day
• 0.1-0.5% profit per trade
• 30-60 minutes to first opportunity

Reality Check

With current implementation: 0 opportunities per day ❌

This is NOT due to market conditions. This is a system gap that must be fixed before the bot can generate any profits.

---

Conclusion

While the MEV bot demonstrates:

• ✅ Excellent stability (5.5+ hours uptime)
• ✅ Perfect parser accuracy (100%)
• ✅ Zero edge cases (validated)
• ✅ High system health (99.90/100)

It cannot detect arbitrage opportunities due to a critical gap in the swap event processing pipeline.

The bot is DETECTION READY but NOT PROFIT READY until the swap event logging and arbitrage analysis pipeline is fixed and validated.

---

Next Steps

1. ✅ Document the gap (this report)
2. ⚠️ Investigate swap event write failures
3. ⚠️ Fix swap event serialization
4. ⚠️ Validate price comparison logic
5. ⚠️ Test arbitrage detection with real data
6. ⚠️ Re-run extended validation
7. ⚠️ Update production readiness assessment

Priority: HIGH - This blocks profit generation capability

---

Report Generated: October 25, 2025 Analysis Based On: 5.5 hours runtime, 80,143 blocks, 6,840 DEX transactions Status: Gap identified, requires investigation and fix