The Solana Ecosystem Meme Token Craze Triggers MEV Issues

Recently, meme tokens in the Solana ecosystem have become the focus of the market. Some tokens with misspelled celebrity names have attracted the attention of crypto users, with some even landing on mainstream trading platforms, surpassing a market capitalization of 3 billion USD. On March 15, a token named BOME increased by more than 47 times in just 24 hours, with trading volume exceeding 300 million USD.

However, with the rise of the meme craze, some problems have also emerged. Users often encounter sandwich attacks when purchasing meme tokens on decentralized platforms on the Solana chain, leading to inflated purchase prices and resulting in losses. Such attacks are a form of MEV (Maximum Extractable Value). So, what exactly is MEV? What impact does it have on the blockchain ecosystem? How does Solana respond to the challenges posed by MEV?

MEV and Trading Opportunities

MEV originally referred to Miner Extractable Value, which is the additional profit miners can obtain by adjusting the order of transactions within a block. With the expansion of the concept, MEV now represents Maximum Extractable Value, applicable to all public chain networks.

MEV can be seen as a kind of "tax" that blockchain network maintainers charge to ordinary users. Although it seems like a burden, MEV plays an important role in maintaining the development of the blockchain network and the stability of the ecological economy.

Common MEV strategies include:

1. Atomic arbitrage: Utilizing price differences between different liquidity pools for arbitrage, which helps to balance asset prices.

2. Liquidation: In on-chain lending operations, liquidating unhealthy margin positions to maintain protocol stability.

3. Sandwich Attack: Profit from buying and selling operations before and after user transactions by exploiting the AMM price calculation mechanism.

In addition, it also includes the early purchase of tokens or minting of NFTs in activities such as IDO, INO, etc.

MEV Situation of Solana

Solana adopts a PoS consensus mechanism. Due to high requirements for node operation, most validating nodes are located in large data centers. Validators need to burn 50% of the transaction fees, which encourages them to process as many transactions as possible during the allocation period.

Solana produces a block approximately every 400 milliseconds. Previously, due to the first-come-first-served transaction processing mechanism, MEV operations primarily relied on low latency rather than high fees. To effectively capitalize on MEV, it is necessary to run high-stake validator nodes, which comes at a higher cost.

Solana's Sniping Strategy

1. Garbage transactions: Once a common method for front-running, but can lead to network congestion or even disruptions.

2. Priority gas fee: Part of Solana's new upgrade, aimed at reducing junk transactions through fee competition, similar to Ethereum's mechanism.

3. Jito-Solana: Introduces a mempool and block space auction mechanism, allowing users to submit transaction bundles and bid. It has now become the mainstream validation client for Solana, accounting for 66%.

Future Outlook of MEV

MEV cannot be completely eliminated, and research should focus on how to make it benefit ordinary users and applications in the ecosystem. For example, Jito guides validators to choose their clients through MEV, increasing the diversity of Solana clients. MEV can also be used to protect user and protocol assets, as well as to redistribute network profits.

Overall, MEV is a double-edged sword; it brings challenges while also providing new opportunities for the development of blockchain networks. With advancements in technology and improvements in mechanisms, it is believed that there will be more innovative solutions in the future to balance the pros and cons of MEV and promote the healthy development of the blockchain ecosystem.