An Analysis of the MEV Issues Behind the Meme Token Boom in the Solana Ecosystem

Recently, meme tokens in the Solana ecosystem have become the focus of the market. From BONK to Dogewifhat, and to some intentionally misspelled celebrity-related tokens, they have sparked a frenzy among crypto users. Among them, Dogewifhat even successfully landed on mainstream trading platforms, with a market capitalization exceeding $3 billion at one point. On March 15, the BOME token initiated by crypto artist Darkfarms surged 47 times in just 24 hours, with trading volume surpassing $300 million.

However, along with the meme craze came a series of problems. Users frequently encountered sandwich attacks when purchasing these tokens on decentralized platforms on the Solana chain, leading to significantly higher actual purchase prices and heavy 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 is Solana addressing the issues caused by MEV? Let's delve into these questions.

The Essence and Application of MEV

MEV originally referred to Miner Extractable Value, which was first discovered in the Bitcoin network, where miners could obtain additional profits by reordering transactions within a block. 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 "tax" charged by blockchain network maintainers to ordinary users. Although it may seem like a burden, MEV plays an important role in maintaining network development and ecological economic stability. Common MEV strategies include:

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

2. Liquidation: Maintain the stable operation of the lending protocol by liquidating unhealthy margin positions.

3. Sandwich Attack: Trading ahead of regular users in AMM to profit from it.

In addition, activities such as IDO and INO often become scenarios for MEV profit.

The Current Situation of MEV on Solana

Solana adopts a PoS consensus mechanism, with validation nodes primarily concentrated in large data centers. To incentivize validators to process more transactions, Solana mandates that 50% of all transaction fees must be burned.

Solana produces a block every 400 milliseconds, previously using a first-come-first-served transaction processing mechanism. To take advantage of MEV, it is necessary to compete based on low latency rather than high fees. However, this method requires running high-stakes validator nodes, which is costly.

To address the MEV issue, Solana has adopted the following strategies:

1. Priority gas fee: By introducing a priority gas fee mechanism, the cost of junk transactions is increased, allowing users to fairly compete for transaction priority.

2. Jito-Solana: Similar to Ethereum's Flashbots, it introduces a mempool and block space auction mechanism, allowing users to bid for transaction inclusion. Currently, Jito-Solana has become a mainstream validation client, accounting for 66%.

However, during the recent meme Token craze, sandwich attacks initiated through Jito have still caused serious troubles for ordinary users.

The Future Development of MEV

MEV is not a phenomenon that can be completely eliminated. Future research should focus on how to leverage MEV to benefit all parties in the ecosystem. For example, guiding validators to choose more diverse clients through MEV, using MEV to protect user and protocol assets, and redistributing MEV profits.

In general, MEV is a double-edged sword. Proper utilization can enhance network security and efficiency, but excessive use may also harm user interests. In the future, the blockchain community needs to continuously explore the balance of MEV to achieve the long-term healthy development of the network.