MEV on Solana: Unveiling the Power Games of Blockchain

In the past year, the Memecoin craze has made Solana the focus of traders' attention. However, the real profits do not come from price fluctuations, but are hidden in the Blockchain's underlying MEV( maximum extractable value).

Unlike the public trading bot profits, MEV profits are often hidden in the Block construction and sorting mechanisms, and those who master it are the "invisible operators" that control the on-chain infrastructure. Due to high thresholds, information asymmetry, and power concentration, many people do not understand this system.

When ordinary users use bots to avoid sandwich attacks, MEV catchers manipulate the order of transactions behind the scenes for precise arbitrage. Retail investors compete in speed and strategy, while large institutions with staking advantages and node permissions have already secured their position at the top of the profit pyramid with structural advantages.

In the Solana ecosystem, MEV is not just a trading opportunity, but also a power at the infrastructure level - controlled by a few, forming a capital game with high barriers, high monopolies, and high profits. This article will unveil the huge business opportunity of Solana MEV.

Overview of MEV

MEV refers to Miner Extractable Value, which means miners obtain additional profits by manipulating the transaction packaging. With the rise of Memecoins and DeFi, the scale of MEV is enormous.

The main MEV business includes:

• Liquidation: Liquidating bad loan positions to earn rewards
• Arbitrage: Profiting from price differences between different DEXs
• Sandwich Attack: Buy and sell to profit before and after the target transaction.

MEV behaviors can be divided into:

• Front-running: Execute before other orders
• Post-trade: Execute arbitrage after other trades.

MEV Market Size

According to statistics, last year the MEV revenue reached $1.5 billion, far exceeding other trading strategies.

With the increase in activity on the Solana network, MEV profits have surged. According to a report by Helius, over 90 million arbitrage trades have been identified on Solana in the past year, with an average profit of $1.58 per trade, a maximum single trade profit of $3.7 million, and a total profit of $142.8 million.

Features of MEV on Solana

Compared to Ethereum, MEV on Solana is more intense and concentrated, which stems from its chain design:

• High performance, block time only 400ms
• Sacrifice some decentralization
• Power is highly centralized

Solana does not have a memory pool; other nodes need to obtain data from the current block-producing node. This gives the block-producing node significant power, lacking checks and balances, leading to serious MEV issues.

In contrast, the Ethereum MEV market is more competitive, and profits are squeezed.

Jito: Solana MEV Dominator

Jito is the MEV leader on Solana. The Jito-Solana client was launched in August 2022 with a low initial adoption rate. It began to grow rapidly by the end of 2023, reaching 50% in January 2024, and exceeding 94% usage among validators by the end of the year, forming an absolute advantage.

Jito Operating Model:

1. Jito Bundles Service Allow traders to pay tips to bundle transactions for priority execution. Main process:

• Traders build transactions
• Package the transaction and submit it to the Jito node
• Jito validators prioritize executing these transactions
• Earnings are distributed according to the mechanism

2. Staking Mechanism Allow users to stake SOL to Jito nodes and share profits. Form a complete利益闭环: stakers receive profits, nodes increase block production probability, and traders gain priority execution.

Core Features of MEV

1. Information advantage determines victory or defeat. Whoever can discover arbitrage opportunities and execute trades the fastest will profit, relying on:

• Fast information synchronization, usually requires connecting to large Jito node RPC services
• Quick on-chain, submit transactions via Jito Bundles

2. The Bundle service is monopolistic. The key to MEV lies in block production rights. Jito needs to cover as many Leader Slots as possible, requiring a very high network coverage rate. Once it reaches a critical point, the network effect will self-reinforce.

3. High capital barriers Solana uses PoS, and the more you stake, the higher the probability of producing blocks. Large nodes stake more, produce blocks frequently, and are sensitive to information, forming a capital barrier. Only large nodes with substantial capital can earn MEV.

MEV Revenue Flow

Mainly belongs to three parties:

1. Jito Protocol In the past year, 4.3 billion Bundles were processed, generating 5.51 million SOL in tips. Jito's own revenue was approximately $35 million.

2. High-Quality Staking Nodes The annualized return can reach over 20%, far exceeding ordinary nodes. Income includes inflation rewards, Block rewards, and Jito tips, etc.

3. Block Space Sales Intermediary Collaborate with high-stake nodes, purchase on-chain transaction permissions in bulk, and package them into a Bundle to obtain the price difference. At the same time, embed your own arbitrage trading to capture MEV.

Solana Client Architecture

Main client:

• Solana Official Node: Basic Version, No MEV Optimization
• Jito Node: Mainstream choice, supports Bundle services
• Paladin Node: Jito improved version, provides a fairer mechanism
• Firedancer Node: A high-performance client developed by Jump.

Competitive Logic:

• Jito vs Paladin: The Battle for Fairness
• Firedancer vs Others: Performance Competition

In the future, it may shift from "making money with Jito" to "using high-performance Jito to avoid elimination."

How Large Institutions Become Solana Profit Manipulators

Taking Sol Strategies as an example:

1. Acquire nodes to expand market share
2. Promote governance proposals to consolidate power
3. Promote the listing of ETFs and compete for the dominant power in Blockchain governance.

Summary:

1. MEV is a big business, particularly intense on Solana.
2. MEV protocols like Jito are monopolistic.
3. Concentration of power in Solana, MEV profits are captured by a few parties.
4. Jito client leads, high-performance clients may become the future
5. Solana is suitable for institution-led initiatives, allowing institutions to comprehensively penetrate and compete for governance rights.