MEV Bots, Unibot, and TurboTax for Crypto: Essential Tools for Cryptocurrency Management and Trading

The proliferation of automation is a reality of the modern crypto market. The list of essential tools and software becomes longer and longer every month. Today, we’ve prepared a brief review of extremely useful tools for all traders and crypto enthusiasts. Even if you do not plan to use them, it is worth knowing what other market players use.

MEV Bots: Crypto Monsters

MEV (Miner Extractable Value) bots have forever changed the crypto trading landscape. Whether we like it or not, they are here to stay, and it is important to know what they are and how they work, even if you don’t plan to use them. We will discuss possible reasons to avoid MEV bots further down the line.

How MEV Bots Work

MEV bots exploit the ordering of transactions in blocks. They are mainly used in the Ethereum blockchain, but solutions are also available for other networks. They monitor the blockchain's mempool for transactions presenting value-extracting opportunities and form their transactions to exploit them, manipulating the gas fee system.

The elementary use case for an MEV bot is a so-called “sandwich attack”:

• The bot finds a transaction linked to a token exchange on DEX at a profitable rate with an average or below-average gas fee.
• The bot forms two transactions: one to buy the same tokens as in the “victim” transaction on the same DEX and the other - to sell these tokens on a different DEX. The gas fee is increased for the first transaction and decreased for the second one, so the “victim” will be processed between them.
• As a result, the user who sent the “victim” transactions receives less for their tokens since the price has changed, and the bot owner gained profit at their expense.

MEVs often use flash loans to support such operations, so no large capital investment is required to run them.

The entire MEV industry was “kickstarted” by “sandwich attacks”. Since then, MEV bots have used the same basic principles but have become much more sophisticated and spawned many varieties.

Types of MEV Bots

Here is a list of the most prominent types of MEV bots on the market. There are many more types, subtypes, and variations out there.

• Front-running bots are the basic form of MEV, performing attacks like the one mentioned above.
• Arbitrage bots exploit price differences between DEXes.
• Liquidation bots liquidate undercollateralized positions on lending platforms for a profit.
• Sniper bots are front-running bots focused on events like token launches.
• Censorship bots try to censor certain transactions (i.e., to ensure they are not added to a block for as long as possible) to manipulate markets or harm competitors.

Notable MEV Bots

The MEV industry is extremely fluid and competitive - its landscape changes completely in a matter of months. At the moment, the most interesting MEV bots and platforms are:

• JaredTheSubway - one of the most popular bots
• Flash Bots - specifically designed to mitigate the harmful effects of other MEVs
• Front Runner MEV - a leading front-runner bot
• Arken - a well-known MEV for fast trade execution
• Mempool Auction - users can bid on gas fees to optimize their transactions.

Why Not Everybody Uses MEV Bots?

MEVs are efficient and maximize profits effectively, so why are they not used by everybody?

1. Ethical concerns: MEVs bring profit through market manipulations at the expense of other market players. Not all traders are ready to use such tools.
2. Security concerns: Some MEV bots can theoretically compromise decentralized protocols’ integrity by exploiting their vulnerabilities. MEV-resistant protocols are also already in development.
3. Regulatory scrutiny: MEV bots have already attracted the attention of regulators in many countries due to the extensive use of manipulative practices. Additional transparency requirements may be introduced for MEVs soon.

Unibot Crypto Trading Bot

Unibot made many headlines this year. It is one of the most talked-about crypto trading bots at the moment. Opinions on Unibot vary wildly, from “the best trading tool ever” to “a really bad and useless bot.” As is often the case, the truth is neither — it is a powerful tool, but it is not perfect.

Unibot: The Basics

Unibot is a Telegram bot for crypto trading and liquidity provision, launched by Diamond Protocol in 2023. It is integrated with Uniswap v3 and enables users to conduct various trades using the Telegram messenger app.

Despite being relatively new, the bot has already become one of the major players in cryptocurrency trading and has taken the leading position in the Telegram trading space. It also has a web app trading terminal, but Unibot benefited from the speed of trade execution, a well-thought-out UI, a high level of security (due to powerful encryption), and many features for traders. Liquidity provision functionality, or, to be precise, leveraged liquidity provision, also played a big part in Unibot's success.

Unibot Features

Leverage liquidity provision was Unibot's main initial advantage and still plays a major role in its popularity. The mechanism is simple in concept: liquidity providers can borrow a token from the pool when they provide another token. The borrowed token can be shortened so LPs can hedge their stakes.

There is also a revenue-sharing mechanic: holders of UNIBOT tokens (the project’s native token) receive a share of the platform’s revenue in ETH. Interestingly, no staking or locking of tokens is required - just having UNIBOT in your wallet is enough.

Unibot crypto trading functionality is quite impressive as well:

• Multi-Chain Trading: Trading across Ethereum, Base, Solana, and Arbitrum chains is possible.
• Extensive tools for analytics: Instant scans, a Watchlist, real-time token graphs, etc.
• Advanced automated trading tools include limit orders, Dollar-Cost Averaging orders, the Token Sniper feature (for early access to newly released tokens), and others.
• Copy trading allows for following trades of experienced traders. However, there is no customization - only strict copying is permitted.
• Fail Guard simulates transactions before finalizing them and prevents their broadcasting to the network if enabled. This prevents the waste of gas on failed transactions. However, according to user reviews, this feature is not very reliable.

The trading fees vary from chain to chain, but Unibot charges 1% on average. The fees can be reduced (by 10% to 50%) via the loyalty program - the more UNIBOT tokens you hold and trade, the more reduction you get.

Not all of Unibot’s features are well-appreciated by the community. Fail Guard draws a lot of criticism due to its reliability, Copy Trading - due to its limitations, and the loyalty program - due to its aggressive promotion. Unibot has also been involved in some controversies and dramas lately. For example, a series of security incidents led to developers terminating their partnership with the Solana team.

Nevertheless, despite all its shortcomings, Unibot is among the most prominent crypto trading bots on the market, especially among Telegram bots.

TurboTax Crypto Reporting

US tax reporting is notoriously complicated for individuals, making special services and software solutions virtually necessary. TurboTax, one of the most popular services, is a prime example. It's used by millions of Americans and Canadians, highlighting the importance of such tools in the tax reporting process.

TurboTax supports reporting income from crypto, but its crypto functionality leaves much to be desired. So, if cryptocurrencies are your only source of taxable income, looking for a more specialized tool would be a good idea. However, even the most dedicated traders usually have some “traditional” sources of income, so using TurboTax as a universal solution is reasonable. You only have to keep in mind its quirks.

TurboTax: Crypto Reporting Details

Crypto support is present only in the “Premier” and “Self-Employed” packages. So, if you want to report crypto income, you might need to upgrade your plan.

Then, there is an issue with supported crypto exchanges. The list includes the majority of popular exchanges operating in the US, but there are some exceptions and difficulties.

The following platforms are supported without issues:

• Binance US
• Coinbase
• Robinhood
• Bitstamp
• Crypto.com
• Gemini

Kraken, KuCoin, and Bittrex are supported except for futures and margin trading. The situation with Gate.io, BlockFi, Celsius, Voyager, and eToro is more complicated. These platforms are technically supported, but their CSV files are not fully compatible with TurboTax. Thus, the user has to download CSV files, manually edit them to match the software standards (there are manuals online), and upload them to TurboTax.

Similar issues exist in the functionality, allowing users to add their wallets in popular blockchain networks to automate reporting. For example, you can add your Ethereum address, but DeFi transactions and some others won’t be imported.

On the bright side, TurboTax's limit of 2251 transactions per year is not that big of a deal. If you report more than 2251 transactions, the software will simply compact the data, combining transactions to fit the limit.

TurboTax: Crypto Staking, Mining, and Cost Basis Issues

The problem TurboTax users complain about the most is that the software often can’t determine the cost basis of cryptocurrency. This is especially true about assets earned via mining, staking, or airdrops.

The same happens if you move crypto to an unsupported platform. For example, if you bought ETH on Binance and sold it on Coinbase - TurboTax will determine the cost basis correctly. But if you used these coins for staking on a third platform between these transactions, it would be too much for TurboTax. Thus, you often have to manually input the cost basis of cryptocurrencies.

As you can see, using TurboTax to report crypto income is troublesome and demands extensive manual input from the user. While it certainly beats doing your taxes independently, it is far from perfect. If cryptocurrency income is just supplemental - TurboTax is a good solution if you rely primarily on crypto to make a living or get most of your crypto income from mining or staking - more specialized software would be preferable.

Finally, before sending your report to the IRS - always review the list of transactions TurboTax (or any other service) included in the report. Mistakes and errors happen; in this case, they can be quite costly.