Crazy BOME craze, interpreting the MEV problem behind Solana Meme craze

Meme tokens in the Solana ecosystem have been the focus of the market recently. BONK, Dogewifhat or some deliberately misspelled celebrity meme tokens have become the targets of crazy pursuit by crypto users. Dogewifhat is even listed on Robinhood Crypto and Binance, with a market value of over US$3 billion. On March 15, the BOME token launched by crypto artist Darkfarms increased more than 47 times in 24 hours, with trading volume exceeding US$300 million.

The problem that comes with the meme craze is that when users purchase meme tokens on the decentralized platform of the Solana chain, they are frequently subjected to sandwich attacks, resulting in high prices for meme tokens and losses. . This type of bot is a MEV attack. What is MEV? What impact does it have on the blockchain ecosystem? How does Solana handle issues caused by MEV? Today Beosin will analyze it one by one for everyone.

MEV and trading opportunities

The full name of MEV is Maximal Extractable Value, which means the maximum extractable value. Initially, MEV refers to Miner Extractable Value, that is, in the Bitcoin network, miners can obtain profits beyond the block and network fees by reordering transactions in the block. However, MEV actually has nothing to do with the type of different blockchain networks. In fact, similar situations exist in all public chain networks, so MEV is expanded from the category of miner extractable value (Miner Extractable Value) to the maximum extractable value (Maximal Extractable Value).

MEV is similar to a fee that is charged to ordinary users by participants who maintain the blockchain network. This may seem like a burden, but in fact MEV promotes the development of the blockchain network and the stability of the ecological economy. plays an important role.

Since miners/validators can reorder transactions in a block, MEV is often used in the following strategies:

1. Atomic arbitrage

Arbitrageurs will Take advantage of the opportunity of MEV to discover price differences on the same trading pair in different liquidity pools on the blockchain. They will do whatever they can to get transactions packaged in the same block to make a profit. Through this arbitrage behavior, the prices of assets in different liquidity pools can be effectively balanced to ensure market stability and equilibrium. The behavior of arbitrageurs is based on keen insight and quick response to market opportunities. They obtain profits by taking advantage of the price difference between trading pairs, thereby promoting the efficient operation of the market

2. Liquidation

When conducting on-chain lending business, in order to avoid adverse consequences, lending protocols usually allow third-party liquidators to participate in the liquidation of collateral to ensure the stable operation of the protocol. For example, MakerDAO allows users to borrow and lend using assets such as ETH, with liquidation bots handling potential profit opportunities. This liquidation method is designed to maintain the smooth operation of the agreement while protecting the interests of both borrowers and lenders.

3. Sandwich attack

Use AMM’s price calculation mechanism to make profits by buying in advance of ordinary users in a block and then selling in advance, thus completing the victim’s transaction first. Purchase transaction.

There are other profitable activities such as IDO, INO preemptive purchase of tokens, minting NFT, etc., and MEV can also be used to make profits.

SolanaMEV

Solana is similar to public chains such as ETH and uses PoS to ensure security. Due to the extremely high requirements for Solana's node operation, ordinary users cannot run Solana's verification nodes. Most of Solana's validation nodes are located in data centers that handle massive amounts of data. Validation nodes hosted in data centers can take advantage of network advantages and parallel design to process more transactions and obtain more block rewards.

50% of all transaction fees collected by validators need to be destroyed. The purpose of this is to incentivize validators to process as many transactions as possible within the allotted period.

Solana’s on-chain handling fee destruction hits a new high in recent years: https://dune.com/21co/solana-key-metrics

at On Solana, a block is produced approximately every 400 ms. Previously, due to Solana’s first-come-first-out transaction processing mechanism, taking advantage of MEV had to compete for low latency rather than high fees. Being able to read the block state first means being able to execute profitable transactions with a higher probability.

Previously, to utilize MEV on Solana, you needed to run a node to read the latest network status and be a high-stake validator. This solution is demanding and costly.

Solana front-running strategy

1. Spam transactions

Previously, due to Solana’s first-in-first-out transaction processing mechanism, spamming spam transactions has always been the most common way to front-run. This method does not work on Solana. Many people have used this method to make profits on Friend.tech of the Base chain. However, this method requires the verifier to process a large number of failed transactions. In severe cases, it may overload the verifier's processing capacity, lead to inconsistent consensus, and finally force the network to interrupt.

2. Priority gas fees

Priority gas fees are part of a new upgrade to Solana designed to address and reduce transaction spam by creating new incentives for transaction priority. The priority gas fee determines priority inclusion in the block (a more costly method) based on the gas level, thereby helping to reduce spam transactions.

The introduction of this mechanism will increase the cost of generating spam transactions. However, the priority gas fee needs to always be high enough to ensure that spamming senders are incurring substantial costs in real terms.

Additionally, the introduction of priority gas fees enables users to express their desire for priority confirmation of transactions in a fair and competitive manner. Solana's mechanism is actually similar to Ethereum. We can see Solana's gas war:

It consumes 21.78 SOL to confirm the transaction: https: //explorer.jito.wtf/bundle/a6fb6ad4f7f4ad1f797c2115f688e6bc178f2609a1a420769af97a17b6dbde4c

3.Jito-Solana

Jito-Solana is like Solana’s Flashbot, by introducing mempool and block Space auction mechanism, users submit the transaction packages they want to be included in the block and the client bidding for these packages to the validator running Jito-Solana. The highest bidder wins and their bundle is committed on-chain, creating an additional revenue stream for validators and their stakeholders. The tip (Tip) paid is 100% paid to the verifier and its stakers:

https://dune.com/21co/solana-key- metrics

Currently, Jito-Solana client accounts for 66% of the verification node client market share, becoming Solana’s mainstream verification client. Validator MEV rewards and the number of validators adopting the Jito client (currently 814) indicate that more and more Solana participants are considering or are already practicing how to use MEV to capture/distribute profits on Solana.

In this Solana meme craze, sandwich attacks launched through Jito have made ordinary users miserable. Not long ago Jito announced that it would temporarily shut down its mempool to reduce sandwich attacks:

##https://twitter.com/jito_labs/status/1766228889888514501

How to treat MEV correctly?

MEV is not something that can really be eliminated. The focus of MEV research should be on how to use MEV to benefit ordinary users and applications in the ecosystem: For example, Jito guides Solana validators to choose their clients through MEV, increasing the diversity of Solana clients. Of course, currently due to its network effect , which has led to certain centralization issues; using MEV to save the assets of users and protocols; using MEV to redistribute the benefits generated by the network, these are all aspects of MEV that are beneficial to the entire blockchain network ecology.

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