Solana's MEV Moment: It's Time to Seriously Address the MEV Issue

Cryptocurrency researcher Zhev collaborates with Dose of DeFi to analyze the MEV issue on the Solana network, pointing out that as the network becomes more active, the previously less significant MEV issue has gradually become a future challenge for Solana. Currently, there seems to be no good solution either socially or technically.

This article is compiled and translated. For any doubts, please refer to the original article.

Solana Network's Activity Makes MEV Increasingly Lucrative

The emergence of MEV is actually a proof of network growth, so it is inevitable. In fact, even the Bitcoin network has begun to experience new MEV issues with the rise of Ordinals and related economic activities.

Recently, the Solana network has attracted many users to join and interact with the network due to factors such as meme hype, anticipated airdrops, and its existing low-cost design, with the number of daily active addresses surpassing 1 million.

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However, this also makes it gradually profitable for miners to extract Maximal Extractable Value (MEV).

Solana's MEV Challenges on a Technical Level

Solana's Unique Network Design

Solana has some significant innovative differences in transaction fee markets and efficiency compared to Ethereum, including:

• No mempool: Transactions are forwarded directly from clients to the current leader responsible for block generation, theoretically reducing transaction confirmation delays and increasing the threshold for extracting MEV. However, due to network transaction transmission and other factors, different validators have different processing times, and this jitter allows validators the opportunity to seize MEV in practice.
• State isolation: Since the Solana network lacks a mempool, different types of transactions have a specific path to be transmitted to the leader and added to the block, making transactions between different dapps more independent.
• Parallel execution: Solana can process non-overlapping transactions in the same block. Because Solana's block production is roughly continuous, and the roles of leaders in different slots are pre-arranged. These two factors, along with the state isolation feature, support multi-threaded transaction execution.

Solana's Fee Market: Cheaper Doesn't Mean Better

Unlike Ethereum, network fees on Solana are usually very low.

The base fee on the Ethereum network is automatically adjusted based on the complexity of the contract and current demand, and users can increase the priority fee if they want to expedite transactions; while Solana only regulates its priority fee through simple demand adjustments, the base fee does not change due to demand, and the Solana base fee is a fixed 5000 lamports per signature, this method does not accurately reflect the resource usage of transactions and the externalities mentioned in economics, leading to the possibility of underutilized block space.

Although this allows users to enjoy lower fees to use the network, it also leads to many bots spamming with junk transactions to grab MEV, even squeezing out the transaction demands of existing users.

Why have transactions on Solana been failing frequently and congested recently?

Existing Solution: Jito's MEV Market Failure

Solana's client Jito has a product called the MEV transaction market, aiming to build a MEV transaction mechanism in the Solana ecosystem similar to Flashbots to accept MEV and minimize negative impacts.

Shortly after its launch, due to dissatisfaction with MEV being extracted through sandwich attacks, there was a lot of community backlash, and eventually, the Jito team was forced to shut down this service in March, stating that more evaluation is needed.

As the inability to accept the absence of negative externalities originally and the choice to ignore the Jito solution, does not eliminate the increasingly unavoidable MEV issues on Solana.

Solana Currently Relies on Social Control of MEV

Although the recent increase in on-chain activities has attracted MEV participants like Jito and Ellipsis to start building MEV infrastructure, the main validators have not yet begun to run their own Solana MEV strategies, which is in stark contrast to all major validators running MEV boost on Ethereum, indicating that Solana MEV is still in a relatively early and mild stage.

The Solana validator community is currently not as antagonistic as Ethereum's, so protocols that do not extract MEV and prioritize end-user experience are prevailing in the ecosystem.

However, this phenomenon will not last long, as societal controls cannot forever govern the behavior of participants on the chain, and blockchains must be capable of resisting self-interested parties.

Social layers are effective in preventing predatory behavior, at least for now, but only for a short time; technical improvements at the protocol level are the only long-term solution.

Solana's Moment of MEV

There is Still Time and Lessons to Be Learned from Ethereum

MEV has already dominated the fee market on Ethereum and will soon do so on Solana. However, Solana has not yet reached the inevitable MEV transition phase, there is still time to find solutions, and lessons can be learned from the current pros and cons of Ethereum's solutions.

Solana still needs to go through an MEV revolution similar to its peers, not necessarily choosing the proposal Ethereum chose—PBS, but adopting a systematic, holistic solution to ensure a stable network fee market in the long term.

The Community Needs to Be Prepared for Change

To achieve the above goal, all ecosystem participants must answer this tricky question: should all staked SOL be rewarded with MEV rewards through MEV boost like Ethereum, rather than evasion?

Having the correct understanding that Solana is entering its MEV moment, both technically and socially, will not remain the same as in the past.

It is too early to judge Solana's MEV industry at this time.