How Do MEV Bots Detect Arbitrage Opportunities on DEXs?

MEV bots detect arbitrage opportunities on decentralized exchanges (DEXs) by continuously monitoring price discrepancies between different trading pairs across various platforms. They analyze real-time market data, including order books and transaction volumes, to identify instances where the same asset is priced differently. Once a potential arbitrage opportunity is spotted, the MEV arbitrage bot executes trades rapidly to exploit the price difference before it vanishes. This process often involves leveraging automated strategies and optimizing gas fees to ensure maximum profitability while minimizing latency, allowing the bot to capitalize on fleeting opportunities in the fast-paced DeFi environment.