The Meme Token Craze in the Solana Ecosystem and the MEV Issues Behind It

Recently, meme tokens within the Solana ecosystem have become the focus of the market. Tokens like BONK and Dogewifhat have become hot targets pursued by crypto users, with Dogewifhat even landing on mainstream exchanges, reaching a market cap of over $3 billion. On March 15, the BOME token initiated by crypto artist Darkfarms surged over 47 times within 24 hours, with trading volume exceeding $300 million.

However, with the rise of the meme Token craze, some problems have also emerged. Users often encounter sandwich attacks when purchasing meme Tokens on decentralized platforms on the Solana chain, resulting in higher purchase prices and losses. These attacks fall 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 issues caused by MEV?

MEV and Trading Opportunities

MEV stands for Maximal Extractable Value, initially referring to the value that miners can extract, and later expanded to mean the maximum extractable value. It exists in all public chain networks and can be seen as a form of "tax" imposed by blockchain network maintainers on ordinary users. Although it may seem like a burden, MEV plays an important role in the development of blockchain networks and the stability of ecological economics.

MEV is often used in the following strategies:

1. Atomic arbitrage: Utilizing the price differences between different liquidity pools for arbitrage, which helps to balance asset prices.

2. Liquidation: Participate in the liquidation of unhealthy margin positions to maintain the stable operation of the lending protocol.

3. Sandwich Attack: Profit by buying first and then selling in the same block by front-running ordinary users' transactions.

In addition, it also includes profit-making activities such as purchasing tokens or minting NFTs in advance during IDO, INO, and other events.

MEV Situation of Solana

Solana uses a PoS consensus mechanism, with most validator nodes located in high-performance data centers. Validators are required to burn 50% of the transaction fees to incentivize them to process as many transactions as possible during the allocated time period.

Solana produces a block approximately every 400 milliseconds. Previously, due to its first-in-first-out transaction processing mechanism, leveraging MEV mainly relied on low latency rather than high fees. However, this approach requires high costs and technical barriers.

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

1. Priority gas fees: As part of the new upgrade, aimed at reducing spam transactions by creating new incentives for transaction prioritization.

2. Jito-Solana: Similar to the Solana version of Flashbot, it introduces a mempool and block space auction mechanism, allowing users to submit transaction bundles and bid.

Currently, the Jito-Solana client has captured 66% of the market share for validator node clients, becoming the mainstream validator client for Solana. However, during the recent meme Token craze, sandwich attacks initiated through Jito have caused considerable trouble for ordinary users.

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 all parties in the ecosystem. For example, Jito guides Solana validators to choose its clients through MEV, increasing client diversity; using MEV to protect user and protocol assets; redistributing the profits generated by MEV, etc. These are all beneficial aspects of MEV to the blockchain network ecosystem.

However, the use of MEV also needs to be balanced to avoid excessive centralization and unfair impacts on ordinary users. With the development of technology and the improvement of regulations, it is believed that more innovative MEV applications and management solutions will emerge in the future, bringing more positive impacts to the blockchain ecosystem.