mev-beta/docs/spec/PLANNER.md

MEV Bot Project Planning Document

Overview

This document provides a comprehensive plan for developing and enhancing the MEV (Maximal Extractable Value) bot with a focus on arbitrage opportunities on the Arbitrum network. The bot monitors the Arbitrum sequencer for potential swap opportunities and identifies profitable arbitrage opportunities across different DEX protocols.

Project Goals

1. Core Functionality: Build a robust MEV bot that can identify, analyze, and execute profitable arbitrage opportunities
2. Performance: Achieve sub-millisecond processing for arbitrage detection with high-frequency monitoring (250ms intervals)
3. Multi-Protocol Support: Support multiple DEX protocols including Uniswap V2/V3, SushiSwap, and others on Arbitrum
4. Reliability: Implement robust error handling, retry mechanisms, and graceful degradation under load
5. Security: Ensure secure transaction signing, rate limiting, and input validation
6. Scalability: Design for horizontal scalability with concurrent processing and efficient resource utilization

Current Architecture Analysis

Core Components

1. Main Application (cmd/mev-bot/main.go)

   • Entry point with CLI commands for starting and scanning
   • Configuration loading and validation
   • Service initialization and lifecycle management
   • Metrics and logging setup

2. Arbitrage Service (pkg/arbitrage/)

   • Core arbitrage detection and execution logic
   • Multi-hop scanning capabilities
   • Opportunity ranking and prioritization
   • Database integration for persistence

3. Market Monitoring (pkg/monitor/)

   • Arbitrum sequencer monitoring with L2 parsing
   • DEX event subscription and processing
   • Rate limiting and fallback mechanisms
   • Concurrent processing with worker pools

4. Market Analysis (pkg/market/)

   • Pipeline processing for transaction analysis
   • Pool data management with caching
   • Price impact calculations using Uniswap V3 mathematics

5. Event Processing (pkg/events/)

   • DEX event parsing from transaction logs
   • Protocol identification and classification
   • Event type categorization (Swap, Add/Remove Liquidity, New Pool)

6. Market Scanning (pkg/scanner/)

   • Arbitrage opportunity detection
   • Profit estimation and ranking
   • Slippage protection and circuit breaker mechanisms
   • Triangular arbitrage path discovery

7. Uniswap Pricing (pkg/uniswap/)

   • Precise Uniswap V3 pricing calculations
   • sqrtPriceX96 to tick conversions
   • Price impact and liquidity calculations
   • Optimized mathematical implementations

8. Security (pkg/security/)

   • Secure key management with encryption
   • Transaction signing with rate limiting
   • Audit logging and session management

Communication Flow

1. Monitoring Layer: Arbitrum sequencer → L2 parser → DEX event detection
2. Analysis Layer: Event parsing → Pipeline processing → Market analysis
3. Scanning Layer: Market data → Arbitrage detection → Profit calculation
4. Execution Layer: Opportunity ranking → Transaction execution → Result logging

Development Phases

Phase 1: Foundation Enhancement (Weeks 1-2)

1.1 Configuration and Environment

• Implement comprehensive environment variable validation
• Add support for multiple configuration environments (dev, staging, prod)
• Implement hot-reloading for configuration changes
• Add configuration validation with detailed error messages

1.2 Core Monitoring Improvements

• Enhance Arbitrum L2 parser for better transaction type handling
• Implement WebSocket reconnection mechanisms with exponential backoff
• Add comprehensive error handling for RPC endpoint failures
• Implement fallback endpoint switching with health checks

1.3 Event Processing Optimization

• Optimize event parsing for performance with caching
• Add support for additional DEX protocols (Camelot, Balancer, Curve)
• Implement event deduplication to prevent processing the same event multiple times
• Add event filtering based on configured thresholds

Phase 2: Market Analysis and Scanning (Weeks 3-4)

2.1 Pool Data Management

• Implement intelligent pool discovery for new token pairs
• Add pool data validation and health checks
• Implement pool data synchronization across multiple endpoints
• Add support for pool data persistence in database

2.2 Pricing Calculations

• Optimize Uniswap V3 mathematical calculations for performance
• Implement precise fixed-point arithmetic for financial calculations
• Add comprehensive unit tests for pricing functions
• Implement caching for frequently accessed price data

2.3 Arbitrage Detection Enhancement

• Implement advanced arbitrage path discovery algorithms
• Add support for multi-hop arbitrage opportunities
• Implement real-time profit calculation with gas cost estimation
• Add arbitrage opportunity validation to prevent execution of unprofitable trades

Phase 3: Execution and Risk Management (Weeks 5-6)

3.1 Transaction Execution

• Implement flash loan integration for capital-efficient arbitrage
• Add support for multiple execution strategies (single-hop, multi-hop, flash loans)
• Implement transaction bundling for atomic execution
• Add transaction simulation before execution

3.2 Risk Management

• Implement position sizing based on available capital
• Add portfolio risk limits and exposure tracking
• Implement market impact assessment for large trades
• Add emergency stop functionality for critical situations

3.3 Circuit Breakers and Protection

• Implement comprehensive circuit breaker patterns
• Add slippage protection with configurable thresholds
• Implement rate limiting for transaction execution
• Add monitoring for MEV competition and adjust strategies accordingly

Phase 4: Performance Optimization (Weeks 7-8)

4.1 Concurrency Improvements

• Optimize worker pool configurations for maximum throughput
• Implement intelligent load balancing across workers
• Add performance monitoring and profiling tools
• Optimize memory allocation patterns to reduce garbage collection pressure

4.2 Database Optimization

• Implement database connection pooling
• Add database query optimization with indexing
• Implement efficient data caching strategies
• Add database backup and recovery mechanisms

4.3 Network Optimization

• Implement connection pooling for RPC endpoints
• Add request batching for multiple RPC calls
• Implement intelligent retry mechanisms with exponential backoff
• Add network latency monitoring and optimization

Phase 5: Testing and Security (Weeks 9-10)

5.1 Comprehensive Testing

• Implement unit tests for all core components
• Add integration tests for end-to-end workflows
• Implement property-based testing for mathematical functions
• Add stress testing for high-load scenarios

5.2 Security Enhancements

• Implement comprehensive input validation
• Add security scanning for dependencies
• Implement secure key storage and rotation
• Add audit logging for all critical operations

5.3 Monitoring and Observability

• Implement comprehensive metrics collection
• Add real-time alerting for critical events
• Implement distributed tracing for transaction flow
• Add performance profiling and optimization recommendations

Phase 6: Documentation and Deployment (Weeks 11-12)

6.1 Documentation

• Create comprehensive user documentation
• Add API documentation for all public interfaces
• Create deployment guides for different environments
• Add troubleshooting guides and best practices

6.2 Deployment Automation

• Implement CI/CD pipeline with automated testing
• Add containerization with Docker and Kubernetes support
• Implement blue-green deployment strategies
• Add monitoring and alerting for production deployments

Technical Requirements

Performance Targets

• Latency: Sub-millisecond processing for arbitrage detection
• Throughput: Process 100+ transactions per second
• Availability: 99.9% uptime with automatic failover
• Scalability: Horizontal scaling to handle peak loads

Security Requirements

• Key Management: Secure storage and rotation of private keys
• Rate Limiting: Prevent abuse of RPC endpoints and transaction execution
• Input Validation: Comprehensive validation of all inputs
• Audit Logging: Detailed logging of all critical operations

Reliability Requirements

• Error Handling: Graceful degradation under failure conditions
• Retry Mechanisms: Exponential backoff for transient failures
• Health Checks: Continuous monitoring of system health
• Automatic Recovery: Self-healing mechanisms for common issues

Risk Mitigation Strategies

Technical Risks

1. RPC Endpoint Failures: Implement multiple fallback endpoints with health checks
2. Network Latency: Optimize connection pooling and request batching
3. Memory Leaks: Implement comprehensive memory profiling and optimization
4. Concurrency Issues: Use proven synchronization patterns and extensive testing

Financial Risks

1. Unprofitable Trades: Implement comprehensive profit calculation and validation
2. Slippage: Add slippage protection with configurable thresholds
3. Gas Price Spikes: Implement gas price monitoring and adaptive strategies
4. MEV Competition: Monitor competition and adjust strategies accordingly

Operational Risks

1. Configuration Errors: Implement comprehensive configuration validation
2. Deployment Failures: Implement blue-green deployment strategies
3. Data Loss: Implement database backup and recovery mechanisms
4. Security Breaches: Implement comprehensive security measures and monitoring

Success Metrics

Performance Metrics

• Transaction processing latency < 1ms
• Throughput > 100 transactions/second
• System uptime > 99.9%
• Resource utilization < 80%

Financial Metrics

• Profitable trade execution rate > 95%
• Average profit per trade > 0.01 ETH
• Gas cost optimization > 10%
• MEV extraction efficiency > 80%

Operational Metrics

• Error rate < 0.1%
• Recovery time < 30 seconds
• Configuration deployment time < 5 minutes
• Incident response time < 15 minutes

Implementation Priorities

Critical Path Items

1. Core arbitrage detection and execution logic
2. Reliable Arbitrum sequencer monitoring
3. Accurate pricing calculations and profit estimation
4. Secure transaction signing and execution

High Priority Items

1. Multi-protocol DEX support
2. Advanced arbitrage path discovery
3. Comprehensive risk management
4. Performance optimization and scaling

Medium Priority Items

1. Enhanced monitoring and observability
2. Advanced configuration management
3. Comprehensive testing and validation
4. Documentation and user guides

Low Priority Items

1. Additional DEX protocol support
2. Advanced deployment automation
3. Extended performance profiling
4. Future feature enhancements

Dependencies and Constraints

Technical Dependencies

• Go 1.24+ for language features and performance
• Ethereum client libraries for blockchain interaction
• Database systems for persistence
• Monitoring and metrics collection tools

Operational Constraints

• RPC endpoint rate limits from providers
• Gas price volatility on Arbitrum
• MEV competition from other bots
• Network latency and reliability

Resource Constraints

• Available development time and expertise
• Infrastructure costs for high-performance systems
• Access to Arbitrum RPC endpoints
• Capital requirements for arbitrage execution

Timeline and Milestones

Month 1: Foundation and Core Components

• Week 1-2: Configuration, monitoring, and event processing
• Week 3-4: Market analysis and pricing calculations

Month 2: Advanced Features and Optimization

• Week 5-6: Execution and risk management
• Week 7-8: Performance optimization and scaling

Month 3: Testing, Security, and Deployment

• Week 9-10: Comprehensive testing and security hardening
• Week 11-12: Documentation, deployment automation, and final validation

Conclusion

This planning document provides a comprehensive roadmap for enhancing the MEV bot with a focus on reliability, performance, and profitability. By following this phased approach, we can systematically build a robust system that can compete effectively in the MEV space while maintaining security and operational excellence.