Analysis of the MEV Issues Behind the Solana Ecosystem Meme Token Craze

Recently, meme tokens in the Solana ecosystem have become the focus of the market. Some deliberately misspelled celebrity meme tokens have sparked a frenzy among crypto users, with some tokens even successfully listing on mainstream trading platforms, with market values soaring to billions of dollars. On March 15, a token named BOME saw its price skyrocket 47 times in just 24 hours, with trading volume exceeding $300 million, once again igniting discussions in the market.

However, along with the meme Token craze comes a series of problems. Users frequently encounter sandwich attacks when purchasing these Tokens on decentralized platforms on the Solana chain, leading to actual purchase prices being much higher than expected, resulting in unnecessary 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 respond to the challenges posed by MEV? Let's delve into these issues together.

MEV and Trading Opportunities

MEV originally originated from the behavior of miners in the Bitcoin network obtaining additional profits by reordering transactions within blocks. With the development of blockchain technology, the concept of MEV has expanded to all public chain networks and is no longer limited to specific consensus mechanisms.

MEV can be seen as a "tax" that blockchain network maintainers charge ordinary users. Although this may be considered an additional burden on users, in fact, MEV plays an important role in maintaining network security and promoting ecological economic stability.

Common MEV strategies include:

1. Atomic arbitrage: Quickly arbitraging price differences between different liquidity pools helps to balance asset prices.

2. Liquidation: In on-chain lending operations, liquidators quickly liquidate unhealthy positions through the MEV mechanism to maintain protocol stability.

3. Sandwich Attack: Profiting by inserting buy and sell orders before and after user transactions, utilizing the AMM price calculation mechanism.

In addition, MEV is often used to gain an advantage in popular activities such as Token issuance and NFT minting.

MEV Characteristics of Solana

Solana uses a PoS consensus mechanism, with its validating nodes mainly concentrated in large data centers, making it difficult for ordinary users to participate. To incentivize validators to process more transactions, Solana requires the destruction of 50% of the transaction fees.

Solana produces a block approximately every 400 milliseconds, and this high frequency makes the execution of MEV strategies more reliant on low latency rather than high fees. However, traditional MEV strategies are costly to implement on Solana, requiring the operation of high-stake validating nodes.

To address the challenges brought by MEV, Solana has introduced a new mechanism:

1. Priority gas fee: Gain priority processing by increasing transaction fees, similar to Ethereum's gas bidding mechanism.

2. Jito-Solana: Introduces a mempool and block space auction mechanism, allowing users to bid for transaction bundles, with the winner's transactions being prioritized.

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

Future Outlook of MEV

MEV is not a phenomenon that can be completely eliminated, and future research should focus on how to leverage MEV to benefit ordinary users and applications within the ecosystem. For example, incentivizing validators through MEV to choose more diverse clients to enhance the decentralization of the network; using MEV to protect user assets and protocol security; and reasonably distributing MEV gains to benefit the entire network ecosystem.

With the continuous development of blockchain technology, MEV strategies will also continue to evolve. In the future, we may see more innovative MEV applications, as well as fairer and more transparent MEV distribution mechanisms. This not only helps to improve the efficiency and security of blockchain networks but also provides momentum for the long-term healthy development of the ecosystem.