Arbitrage-Bot: Build and Deploy a Blockchain Trading Bot for Ethereum and EVM Chains

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Blockchain technology has opened the door to innovative financial strategies, one of the most compelling being arbitrage trading. The Arbitrage-Bot project is an open-source initiative designed to help developers understand, build, and deploy automated trading bots capable of executing profitable arbitrage opportunities across decentralized exchanges (DEXs) on Ethereum and other EVM-compatible blockchains.

Whether you're a beginner exploring smart contracts or an experienced developer diving into DeFi automation, this guide walks you through every step—from setting up your local environment to deploying a functional arbitrage bot.

What Is Arbitrage in Blockchain?

Arbitrage is a time-tested financial strategy that involves buying an asset at a lower price on one market and selling it at a higher price on another. In traditional finance, this occurs across stock exchanges or currency markets. In blockchain, the same principle applies—but with decentralized liquidity pools like Uniswap, SushiSwap, and PancakeSwap.

Due to network latency, fluctuating demand, and varying liquidity depths, identical token pairs often have mismatched prices across DEXs. These temporary inefficiencies create risk-free profit opportunities—if you can act fast enough.

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Why Focus on Blockchain Arbitrage?

Decentralized finance (DeFi) has transformed how value moves across digital ecosystems. Here’s why blockchain-based arbitrage stands out:

For developers, mastering arbitrage bot development is not just about profit—it's about gaining hands-on experience with real-world DeFi dynamics.

Security and Code Integrity

Trust is critical when working with financial code. The Arbitrage-Bot project enforces strict security practices:

⚠️ Warning: Never use code from unofficial forks or unsigned commits. Malicious modifications could lead to fund loss or system compromise.

We recommend always reviewing the source code before deployment—even in test environments.

Well-Documented, Commented Codebase

One of the standout features of this project is its heavily commented code. Each function, variable, and logic flow includes descriptive annotations that explain:

This approach lowers the learning curve for new developers and ensures maintainability for advanced users.

Getting Started: Setup Guide

Follow these steps to run the Arbitrage-Bot locally using Hardhat for testing.

Clone the Repository

Start by cloning the project:

git clone https://github.com/Innovation-Web-3-0-Blockchain/Arbitrage-Bot.git

Install Dependencies

Ensure Node.js (v16+) and npm are installed, then install required packages:

npm install

This pulls in essential libraries like ethers.js, hardhat, and dotenv.

Create and Configure the .env File

Create a .env file in the root directory with the following fields:

API_KEY=""                    # Your Infura or Alchemy Web3 API key
PRIVATE_KEY=""                # Wallet private key (use test accounts only)
ARB_FOR=""                    # Token0 address (e.g., LINK)
ARB_AGAINST=""                # Token1 address (e.g., WETH)
PRICE_DIFFERENCE=""           # Minimum price delta to trigger trade
UNITS=""                      # Price reporting units
GAS_LIMIT=""                  # Maximum gas limit for transactions
GAS_PRICE=""                  # Gwei price for transaction speed

📌 Security Tip: Never commit your .env file to version control. It contains sensitive keys.

For a reference template, check the project’s documentation: .env.example

Set Deployment Environment

To simulate mainnet conditions:

  1. Fork Ethereum using your own RPC URL (recommended via Infura or Alchemy).
  2. Update your .env file with your API_KEY and a test wallet’s PRIVATE_KEY.

Hardhat will connect to a cloned version of the live blockchain, allowing safe testing without real funds.

Launch Hardhat Node

Run the local blockchain node:

npx hardhat node

This creates a local Ethereum environment pre-loaded with funded test accounts.

Deploy the Trading Contract

With the node running, deploy the arbitrage contract:

npx hardhat run --network localhost scripts/1_deploy.js

After deployment, copy the contract address and update the config.json file under _ARBITRAGE_ADDRESS.

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Start the Trading Bot

Open a new terminal window and launch the bot script:

node scripts/start_bot.js

The bot continuously monitors price feeds from multiple DEXs and waits for arbitrage conditions to be met.

Refer to the Trading Bot Functions Explanation for detailed breakdowns of each module.

Trigger an Arbitrage Trade

Since the forked chain is static, prices don’t change naturally. To simulate a price shift:

npx hardhat run --network localhost scripts/2_manipulate.js

This script alters token reserves on Uniswap to create a price discrepancy—triggering the bot to execute a trade between Uniswap and SushiSwap.

💡 Note: After testing, restart the Hardhat node and redeploy contracts for clean re-runs.

Strategy Overview

The current implementation uses a simple two-hop arbitrage model between Uniswap and SushiSwap for LINK/WETH pairs. When a price difference exceeds the threshold set in .env, the bot:

  1. Queries reserves from both DEXs
  2. Calculates maximum profitable trade size (currently capped at half the lower reserve)
  3. Executes flash swap if profitable
  4. Repays loan + keeps profit

While this logic works for demonstration, real-world strategies may involve:

Developers are encouraged to modify and enhance the core logic based on their risk appetite and target chains.

Deploying the Bot on Mainnet

Ready to go live? Review the Mainnet Deployment Guide for instructions on:

Always start with small capital and monitor trades closely.

Frequently Asked Questions

Q: Can I use this bot for non-EVM blockchains?
A: Not directly. This version supports EVM-compatible chains like Ethereum, BSC, and Avalanche. Non-EVM chains require protocol-specific adaptations.

Q: Is prior Solidity experience required?
A: Helpful but not mandatory. The detailed comments make it accessible for learners. However, understanding smart contract basics improves customization ability.

Q: How fast does the bot react to price changes?
A: Latency depends on your node speed and gas settings. On local forks, execution is near-instant. In production, network congestion may delay detection.

Q: Does this bot handle flash loan logic?
A: Yes, it integrates with Aave or Uniswap V2-style flash swaps to enable zero-capital trades—critical for maximizing arbitrage efficiency.

Q: Are profits guaranteed?
A: No. Market competition, frontrunning, and gas spikes can turn potential gains into losses. Always backtest thoroughly.

Q: How do I prevent being frontrun?
A: Consider integrating private mempools (e.g., Flashbots) or using stealth transaction relays—advanced topics beyond this starter kit.

Community Contributions

Open-source thrives on collaboration. You're welcome to:

All contributions help grow the knowledge base for future developers.

Project Roadmap and Updates

The DeFi landscape evolves rapidly. We plan regular updates including:

Stay tuned through GitHub releases and community discussions.

Core Keywords

arbitrage bot, blockchain trading, EVM chains, DeFi automation, smart contract development, crypto arbitrage, Ethereum trading, automated trading bot

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