Analysis of MEV Issues Arising from the Meme Token Boom in the Solana Ecosystem

Recently, meme tokens in the Solana ecosystem have become the focus of the market. Some misspelled celebrity meme tokens are being sought after by crypto users, with one token even listing on multiple mainstream platforms and a market capitalization exceeding $3 billion. On March 15, a token launched by a crypto artist surged over 47 times in 24 hours, with a trading volume exceeding $300 million.

However, with the rise of the meme craze, users frequently encounter sandwich attacks when purchasing these tokens on the Solana chain, resulting in higher purchase prices and losses. This type of attack falls under the category of MEV (Maximum Extractable Value). So, what exactly is MEV? What impact does it have on the blockchain ecosystem? How does Solana address the issues caused by MEV? Let's delve into this together.

MEV and Trading Opportunities

MEV originally referred to miner extractable value, which first appeared in the Bitcoin network, where miners obtained additional rewards by reordering transactions within blocks. With the development of blockchain technology, the concept of MEV has expanded to all public chain networks, evolving into maximum extractable value.

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

Since block producers can adjust the order of transactions within the block, MEV is often used for the following strategies:

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, liquidation of unhealthy positions is necessary to maintain the stable operation of the protocol.

3. Sandwich Attack: Profiting by front-running user transactions, buying then selling within the same block.

In addition, participating in early trading for activities such as IDO and INO also falls under the category of MEV.

MEV on Solana

Solana uses a PoS consensus mechanism, with most validator nodes located in high-performance data centers. 50% of the transaction fees collected by validators are burned to incentivize them to process more transactions within the specified time.

Solana produces a block approximately every 400 milliseconds. Previously, due to its first-come, first-served transaction processing mechanism, MEV strategies primarily relied on low latency rather than high fees. Being able to read the block state first means a higher likelihood of executing profitable trades.

In the early days, utilizing MEV on Solana required running high-stake validator nodes, which was costly. As the network evolved, various MEV strategies emerged:

1. Garbage transactions: Sending a large number of invalid transactions to occupy network resources, but may lead to network congestion.

2. Priority gas fees: The new upgraded mechanism of Solana allows users to gain transaction priority by paying higher gas fees, similar to Ethereum's gas bidding.

3. Jito-Solana: Similar to Ethereum's Flashbots, it introduces a mempool and block space auction mechanism. Users can submit transaction bundles and bids to validators running Jito-Solana, and the highest bidder's transaction bundle will be processed first.

Currently, Jito-Solana has become the mainstream validation client for Solana, accounting for over 66%. However, during the recent meme Token frenzy, sandwich attacks initiated through Jito have caused troubles for ordinary users, forcing Jito to temporarily shut down its mempool to reduce such attacks.

Correct Understanding of MEV

MEV is not a phenomenon that can be completely eliminated. The focus of research should be on how to leverage MEV to benefit ordinary users and applications in the ecosystem:

• Guide validators to select specific clients through MEV, increasing network diversity.
• Use MEV to protect user and protocol assets.
• Redistribute the profits generated by MEV to benefit the entire network ecosystem.

In summary, MEV is a double-edged sword. Proper utilization can promote network development, but excessive abuse may harm user interests. In the future, how to strike a balance between efficiency and fairness will be an important issue facing the blockchain ecosystem.