Analysis of the Meme Token Craze and MEV Issues in the Solana Ecosystem

Recently, Meme tokens in the Solana ecosystem have become the focus of the market. Some interesting token names like BONK, Dogewifhat, and even some deliberately misspelled celebrity-related tokens have become objects of pursuit for crypto users. Among them, Dogewifhat successfully landed on multiple mainstream trading platforms, with a market value that once exceeded $3 billion. On March 15, the BOME token initiated by crypto artist Darkfarms achieved a rise of over 47 times within just 24 hours, with trading volume surpassing $300 million.

However, accompanying this wave of Meme is a serious issue: users often encounter sandwich attacks when purchasing Meme Tokens on decentralized platforms on the Solana chain. This results in them ultimately buying Meme Tokens at inflated prices, leading to losses. This type of attack is a form of MEV (Maximal Extractable Value) attack. So, what is MEV? What impact does it have on the blockchain ecosystem? How is Solana addressing the challenges posed by MEV? Let's delve into these questions together.

MEV and Trading Opportunities

MEV stands for Maximal Extractable Value. This concept originated from the Miner Extractable Value in the Bitcoin network, which refers to the additional profits miners can gain by reordering transactions within a block. With the development of blockchain technology, the concept of MEV has expanded to all public chain networks.

MEV can be seen as a special "tax" imposed by the maintainers of the blockchain network on ordinary users. Although this seems to be an additional burden, MEV plays an important role in maintaining the development of the blockchain network and the stability of the ecological economy.

Since block producers can reorder transactions within a block, MEV is often used for the following strategies:

1. Atomic Arbitrage: Arbitrageurs exploit price differences between different liquidity pools to engage in arbitrage, helping to balance asset prices.

2. Liquidation: In on-chain lending operations, the liquidator maintains the stable operation of the protocol by liquidating unhealthy margin positions.

3. Sandwich Attack: Profiting by inserting trades before and after user transactions by exploiting the price calculation mechanism of the automated market maker (AMM).

In addition, there are various ways to profit from MEV, such as IDO, INO early token purchases, and minting NFTs.

MEV Situation of Solana

Solana adopts a PoS consensus mechanism, but due to its high requirements for node operation, it is difficult for ordinary users to participate. Most Solana validator nodes are deployed in high-performance data centers, where these nodes can leverage network advantages and parallel designs to process more transactions, thereby earning more block rewards.

In the Solana network, 50% of all transaction fees collected by validators will be burned. This mechanism aims to incentivize validators to process as many transactions as possible within a specified time. The block time of Solana is approximately 400 milliseconds, which means that in order to leverage MEV, the key is to strive for low latency rather than high fees.

To effectively utilize MEV on Solana, it is usually necessary to run high-stakes validator nodes to read the latest network status in real-time. This solution requires high resources and is costly.

Solana's MEV Mitigation Strategy

1. Priority gas fee: As part of the new upgrade of Solana, it aims to reduce spam transactions by creating a new incentive mechanism for transaction priority. This mechanism allows users to increase transaction priority by paying higher gas fees, similar to Ethereum's gas bidding mechanism.

2. Jito-Solana: Similar to Ethereum's Flashbots, Jito-Solana introduces a mempool and block space auction mechanism. Users can submit transaction bundles and corresponding bids to validators running Jito-Solana, with the highest bidding transaction bundle being prioritized for processing. This creates an additional source of income for validators and their stakers.

Currently, the Jito-Solana client has captured 66% of the market share for Solana validator node clients, becoming the mainstream validator client. However, during the recent Solana Meme Token craze, sandwich attacks initiated through Jito caused significant distress for ordinary users, prompting 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 utilize MEV to benefit ordinary users and applications within the ecosystem. For example, Jito guides Solana validators to choose its client through MEV, increasing the diversity of Solana clients; MEV can also be used to rescue assets of users and protocols, as well as to redistribute the profits generated by the network. These are all beneficial aspects of MEV for the entire blockchain network ecosystem.

Overall, MEV is a double-edged sword. While it may bring some disadvantages to ordinary users, it also plays an important role in maintaining network stability and improving efficiency. With the continuous development of technology and the improvement of governance mechanisms, it is believed that there will be more innovative solutions in the future to balance the pros and cons of MEV, bringing greater value to the blockchain ecosystem.