The Current Landscape of MEV on Solana

Introduction

Maximal Extractable Value (MEV) refers to the maximum value that can be extracted from reordering, including, or excluding transactions when producing a block on a blockchain. While initially more prominent on Ethereum, Solana has recently seen a significant rise in MEV activities, particularly driven by the Jito protocol. This article explores the latest developments in Solana's MEV landscape, its impact on the ecosystem, and future prospects.

Rise of MEV on Solana

Solana's MEV revenue has surged, surpassing that of Ethereum. Solana validators have recently earned nearly $7 million from MEV in a single week. This growth is largely attributed to Jito, a protocol offering a modified Solana validator client that facilitates MEV extraction. Approximately 78% of Solana validators are using Jito's client, which allows searchers to bundle transactions and include tips for validators.

Challenges and Controversies

Despite the financial benefits, MEV on Solana has faced criticism and challenges. One major issue is the prevalence of "sandwich attacks," where MEV bots manipulate transaction prices for profit. In response to the growing number of such attacks, Jito Labs recently suspended its mempool functionality, a decision that received mixed reactions from the community. The suspension aims to protect users from these predatory practices but also raises concerns about network spam and failed transactions..

Sandwich Bots

What are Sandwich Bots?

Sandwich bots are a specific type of MEV bot that takes advantage of the way transactions are ordered within a block. These bots identify large purchase orders and execute a transaction just before the purchase to drive up the price, followed by a transaction right after the purchase to sell at the inflated price. This sequence captures the price difference, effectively "sandwiching" the victim's transaction..

Sandwich Bots on Solana

Sandwich bots was not really a thing before Jito Lab’s MEV enabled solana validator client. They spend a lot of time trying to fight against sandwich bots that utilize Jito’s mempool service, but failed to do so and finally decided allow it. About a month after the decision, due to the surge in the amout of new sandwich bots that it starts to get a lot of attention from the broader Solana community, they decided to terminate their public mempool offering.

However, the absence of the public mempool does not entirely eliminate the risk, people are starting to build their own private mempool and making a huge profit from it.

arsc4jbDnzaqcCLByyGo7fg7S2SmcFsWUzQuDtLZh2y is a sandwich bot that runs by the current biggest private mempool, created by the owner of Deeznode, Ari. The bot is making 6-7 figures everyday.

https://solanaforge.xyz/ is a new player in the field that has attracted 300k staked SOL already.

And there are many more private ones.

Arbitrage Bots

What are Arbitrage Bots?

Arbitrage bots are another form of MEV bot that exploits price differences across various exchanges or trading pairs. These bots monitor multiple markets and execute trades to profit from discrepancies in asset prices. On Solana, the high speed and low transaction costs make it an attractive environment for arbitrage opportunities.

Arbitrage bots can bring liquidity and efficiency to the market by ensuring that prices remain consistent across different platforms. However, they can also contribute to network congestion and increase transaction fees during periods of high activity. The profitability of arbitrage bots depends on their ability to execute transactions faster than competitors, leveraging Solana's performance capabilities.

Arbitrage bots on Solana

Due to the low gas fee, there are a lot of arbitrage bots running on Solana. There are typically two types of strategies for these bots. Send through jito and pay a big portion of the profit as the tip, or sending hundreds of transactions to hope some lands.

One of the top bots are known as Bob and Ben: https://birdeye.so/profile/benRLpbWCL8P8t51ufYt522419hGF5zif3CqgWGbEUm/today?chain=solana https://birdeye.so/profile/bobCPc5nqVoX7r8gKzCMPLrKjFidjnSCrAdcYGCH2Ye?chain=solana

They are operated by the same person and each execute one strategy as described above. Arbitrage bots are less profitable and top players are making mostly 5-6 figures per day.

The space of Solana MEV is still evolving every day. As the ecosystem matures, new tools and strategies are being developed to optimize transaction execution and mitigate MEV impacts. Continuous innovation ensures Solana's blockchain remains fair and efficient.