Solana users pay millions to stop bots from attacking their trades – DL News

Solana’s memecoin frenzy and flood of token airdrops have attracted more users and pushed trading volume on the network to unprecedented levels in recent months.

But with increasing trade comes a big problem.

Those involved in running the software that helps process transactions have a greater incentive to run bots that reorder transactions for profit – a practice known in crypto circles as MEV (maximum extractable value).

One of the most common types of MEV is a sandwich attack. Bots carry out sandwich attacks by scanning Solana for users who are buying a token, then jumping into the queue and placing a large order in front of them, driving up the price of the token.

After the victim’s trade is settled and the price continues to rise, the bot sells the tokens at a new higher price.

“Sandwiching is hugely profitable, but terrible for users and the long-term success of the network,” said Lucas Bruder, a contributor at Jito Network DL News. Jito is a Solana MEV infrastructure company.

Jito’s answer to sandwich bots is to charge users a small tip, at least about $0.04 per trade under normal network conditions, to settle their transactions privately.

Once a user pays Jito a small tip to execute their trade, their transaction is included in a private package that is processed through a Jito validator. Validators are software instances that process transitions on Solana.

This means that these malicious MEV bots cannot see these transactions on the network before they are processed, protecting users from sandwich attacks.

Jito’s solution is very popular. Last week, users paid over $9.3 million worth of SOL tips to protect their trades. And if Solana’s trading volume increases, Jito can earn even more.

What is “good” MEV?

Bruder said that the increasing usage of Jito is not only due to individual users protecting their trades, but also because arbitrage traders have more opportunities for profitable trades due to Solana’s increased trading volume.

“Arbitrage and other forms of MEV, such as DeFi liquidations, can be considered ‘good’ MEV because they help maintain orderly and efficient markets,” Bruder said.

Arbitrage traders exploit price differences between exchanges to make a small profit. This helps keep prices accurate and ensures Solana users receive fairer prices when trading.

Not a new problem

Sandwich bots aren’t just available at Solana. On Ethereum and other public blockchains, these bots regularly target users’ trades.

Users can switch to custom RPCs to avoid entrapment. An RPC – or Remote Procedure Call – is a type of computer server that allows users to send transactions to various blockchains.

However, setting up a custom RPC can be difficult, especially for the average user. Jito’s solution is integrated into popular trading venues such as the Jupiter Aggregator browser app and several major wallets. For most users, paying a small fee is a more convenient and readily available way to avoid sandwich bots.

Fighting sandwich bots is also a more pressing issue on Solana than on other networks such as Ethereum. This is because bots can target a higher proportion of trades on Solana due to the network’s lower transaction fees.

The fact that much of Solana’s trading activity is focused on memecoins, assets that typically have low liquidity, has only exacerbated the problem. Assets with low liquidity experience greater price fluctuations when traded, creating more opportunities for sandwich bots.

Additionally, Bruder said, the Solana community tries to reach social consensus — a process by which individuals agree on a change to be made to a blockchain — to avoid supporting those who disagree with it Sandwich attacks on users. “It has become clear which actors are close to Solana and which are not,” he said.

Push out bad actors

The situation is being taken seriously at the highest level.

“Operators who engage in malicious activities such as…sandwich attack transactions or otherwise harm Solana users will not be tolerated,” said Tim Garcia, validator relations lead at the Solana Foundation, in a Tuesday post on the Solana developer Discord – a messaging app.

The Solana Foundation, a non-profit organization dedicated to Solana decentralization, adoption and security, runs a validator delegation program. Anyone who wants to run validators can apply for support from the foundation to cover their costs and ensure that they can run a validator profitably.

Garcia said validators who maliciously target trades will be “immediately and permanently” removed from the program. “Enforcement action will begin within the next 24 hours,” he said.

Tim Craig is a DeFi correspondent at DL News. Do you have a tip? Send him an email at [email protected].