Trading bots have gone from obscurity to some of the most-used crypto applications in 2023.
Top trading bots like Maestro, Banana Gun and Unibot have facilitated over $4B in trading volume over the past year and a half. And over the past 30 days, Maestro and Banagun have burned more gas than all but two Ethereum-based projects — Uniswap and the USDT stablecoin.
Bots provide a key advantage over what was previously available to crypto traders — they use something called intents, which are ways for users to indicate what they want and offload the “how” aspect to a bot.
For example, with a subset of Telegram bots called Snipers, users can paste an address of a soon-to-drop token and specify parameters like the minimum amount of an asset to buy, the amount of slippage, and whether to only purchase in the first block post-launch.
This level of control has proved useful, especially when memecoins — where buying the right coin early could mean millions in profits — took over earlier this year.
These Telegram bots’ success has spawned countless competitors, but when Stephane Gosselin, the co-founder of Flashbots, the leading organization involved in Maximal Extractable Value (MEV), introduced a new Telegram bot called Alfred last week, it sent a message that the sector may be here to stay.
At Devconnect, last week’s Ethereum-focused event, Gosselin found that developers are just starting to understand why Telegram bots are meaningful. “Most people have dismissed [bots] as this bear market speculation thing rather than a much better interface for crypto and DeFi,” he told The Defiant.
Gosselin sees a direct throughline from his work on Flashbots to Alfred. “I started Flashbots not to solve MEV,” he said. “I started Flashbots to improve the user experience on Ethereum.”
Alfred builds on Flashbots’ work by implementing MEV protection. This protects users from sophisticated bots that are programmed to take advantage of opportunities that arise from submitted but unprocessed transactions.
Flashbots and the work around mitigating the negative externalities of MEV essentially gave rise to intents, which an ecosystem of “solvers” enable.
Gosselin thinks the infrastructure around MEV and intents —whose origins lie in developments from MEV research— has hit a new stage of maturity. “It’s the time to actually show the benefits of that to the end user at the interface level,” he said.
From Bots to Terminals
Telegram isn’t the only hot spot for innovation in crypto UX. Unibot, the third largest Telegram bot by volume, launched a web interface last week.
BananaGun, the second largest, is also working on a web product, according to its pseudonymous founder, Just Another Guy.
These products, called terminals, are gaining steam as part of a blossoming “interface layer” in crypto.
Jackson, the founder of Thunder, another terminal which went through the highly selective Alliance accelerator, is betting on that layer.
“I think that eventually every single DEX, whether that’s Uniswap, dYdX, Curve, should eventually become these faceless settlement layers, and then the interfacing layer needs to be built on top,” he told The Defiant.
Jackson got his start creating programs which would purchase exclusive sneakers as soon as they became available online. The founder added that all of Thunder’s engineers also have backgrounds in ‘sneaker bots.’
Jackson sees interfaces like Thunder as having a natural advantage over interfaces like Uniswap Labs’, which introduced a fee last month. The idea is that an interface which only facilitates trades through one protocol —like Labs’— won’t be able to offer better prices than interfaces like Thunder, which source liquidity from across DeFi.
Gosselin thinks protocol-specific interfaces will still retain users but believes both the terminal and bot models can also find their niches.
The space isn’t slowing down — BananaGun is picking up between 300 and 600 new users daily, Just Another Guy said.
Competition for interfaces may also come from aggregators, which, like Telegram bots and terminals, tap into many sources of liquidity at once. Aggregators differ, however, in that users must use a traditional crypto wallet to use them. Because of this, aggregators are typically more secure but don’t offer the level of customization that bots do.
Looking forward, Gosselin noted that large language models (LLMs), which have propelled ChatGPT to become the fastest-growing consumer software product ever, will enable new interfaces which will be specific to each user.
To be sure, like all of crypto, the burgeoning interface layer comes with risks. In this case, users are giving up their private keys to use these solutions.
Kain Warwick, founder of the derivatives platform Synthetix, told The Defiant that he thought many Telegram bots have even worse security guarantees than centralized exchanges, which —as seen with FTX— don’t always work out.
Jackson, on the other hand, believes that giving up private keys is a design tradeoff worth making — Thunder uses a solution called Turnkey, developed by former Coinbase employees, to custody users’ keys.
The founder admits that the idea of taking control of users’ private keys to almost give a centralized exchange-like experience is “polarizing.”
While critical of Telegram bots, Warwick, too, has spoken about trying to take on centralized exchanges like Binance and Coinbase with his most recent venture, Infinex.
Jackson and Just Another Guy both said they are looking into account abstraction, a design paradigm that simplifies UX while maintaining self-custody over assets.
The security concerns around Telegram bots aren’t unfounded — hackers exploited Maestro, the leading Telegram bot with over $3B in volume facilitated, for $500,000 in late October. Attackers hit Unibot less than a week later.
Monetizing the Interface
For now, though, the interfaces popping up throughout crypto stand to change the business dynamics of the entire space.
Monetizing interfaces flies in the face of a famous thesis in the crypto space known as the Fat Protocol theory — in 2016, Joel Monegro, then an analyst at Union Square Ventures, theorized that the blockchain space would differ from traditional web companies in that value would accrue at the protocol layer, rather than at the interface level.
Now, thanks to MEV, intents, and a host of other pieces of infrastructure, venture firms like Figmant Capital are positing that crypto front-ends will capture outsized value.
With swarms of entrepreneurs exploring different models for interfaces, it’s clear that some founders think capturing value at the interface level is worth a shot.
As the landscape of crypto UX continues to develop, one thing Gosselin, Jackson, Just Another Guy, and even Warwick — as stated in previous interviews — can agree on is that it’s a crucial time to improve the UX in crypto.
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