MEV Profits on Solana: Unveiling the Power Games of Blockchain

In the past year, the Memecoin craze has made Solana a gold rush hotspot for traders. Countless people have chased the wild fluctuations of Meme coins, trying to seize the opportunity with trading bots. However, the truly risk-free lucrative business does not flicker on the candlestick chart but hides deep in the dark forest of the Blockchain. This is MEV (Maximum Extractable Value).

Compared to the publicly visible profits of bots, the profits from MEV are often hidden within the block construction and sorting mechanisms, usually controlled by the "invisible hand" that holds power and infrastructure on the chain. Many people do not understand MEV because the operational threshold of this system is high, the information is extremely asymmetric, and the controllers are highly concentrated.

When ordinary users use bots to front-run the market and avoid being squeezed, MEV catchers control the transaction ordering behind the scenes to accurately capture arbitrage opportunities; while retail investors compete with speed and strategy, large institutions with staking advantages and node permissions have already secured their place at the top of the profit pyramid with structural advantages.

On Solana, MEV is not just a trading opportunity; it is a power at the infrastructure level. It is controlled by a very small number of people, forming a capital game with high barriers to entry, high monopoly, and high profits. Today, we will unveil the big business of MEV on Solana.

1. What is MEV?

MEV stands for Miner Extractable Value, which refers to the additional profits that miners can earn by including, excluding, and reordering transactions when packaging blocks. Due to the memecoin craze and active DeFi, the scale of MEV is substantial.

From a business perspective, MEV typically includes: liquidation, arbitrage, and sandwich attacks.

• Liquidation: Liquidating near-default loan positions to earn rewards.
• Arbitrage: Buying and selling simultaneously on different DEXs to profit from price differences.
• Sandwich attack: Buy before the target transaction and then sell for profit.

In terms of behavior, MEV is mainly divided into front-running and back-running transactions:

• Front-running: Place the same order before other traders to profit from price impacts.
• Backward transaction: Arbitrage using temporary price imbalances caused by another transaction.

2. The Business Scale of MEV

According to some unverified statistics, trading bots made 1.1 billion dollars last year, speculation earned 500 million dollars, MEV earned 1.5 billion dollars, automated market makers made 1 billion dollars, celebrity affiliates earned 500 million dollars, and over-the-counter trading profited nearly 5 billion dollars.

With the increase in activity on the Solana network and the Memecoin craze, MEV profits on Solana have surged dramatically. Data shows that 90.44 million successful arbitrage trades have been identified in the past year. The average profit per arbitrage trade is $1.58, with the highest single trade profit reaching $3.7 million. These arbitrages generated a total profit of $142.8 million, of which 88.7% is denominated in SOL.

3. Characteristics of MEV on Solana

The MEV on Solana is more severe and centralized compared to Ethereum, stemming from its underlying chain design. Solana is known for its high performance, with a block time of only 400 milliseconds, but sacrifices some decentralization, resulting in a high concentration of power.

Solana does not have a memory pool, and other nodes must obtain data and submit transactions through the current block producer validator node. This gives block producer validators significant power and lacks a check-and-balance mechanism, leading to severe MEV issues and high monopoly of profits.

In contrast, Ethereum's MEV market is more competitive. There is intense competition between searchers and block builders, which drives down overall MEV profits.

Jito is the MEV king of Solana. Starting from the end of 2023, its client adoption rate has significantly increased, and by the end of 2024, over 94% of Solana validators will be using the Jito-Solana client, forming an absolute dominance.

The core function of Jito is to provide Bundles services. Validators running this client join the Jito Alliance and offer a priority execution channel for transactions. Traders submit bundles by paying a fee, gaining an advantage in transaction ordering.

Jito also launched a staking protocol that allows users to delegate SOL to Jito nodes to share block rewards and MEV profits. This constitutes a complete MEV利益闭环.

4. Key Features of Solana MEV

1. Information Advantage: Competing for MEV opportunities is a matter of millisecond-level speed and sensitivity to on-chain information. It requires rapid information synchronization capabilities and prioritized transaction on-chain channels.

2. Monopoly Effect: Jito's bundle service has a strong network effect. The higher the coverage, the more stable the service, and the harder it is for competitors to shake it.

3. Capital barriers: Solana is a PoS chain, the more you stake, the higher the probability of becoming a Leader. Leaders have the right to order blocks and can earn the most MEV and tips. This creates a highly concentrated capital barrier.

5. MEV Revenue Flow

The MEV profits on Solana mainly flow to three parties:

1. Jito Protocol: As a taxer of infrastructure, the annual revenue is approximately 35 million USD.

2. High-Staking Nodes: On-chain privileged tier, with annualized returns of up to 20% or more.

3. Block Space Sales Broker: Acting as an on-chain intermediary for transactions, earning the price difference and embedding its own arbitrage trades.

6. Solana Client Competitive Landscape

The main clients currently on Solana include:

• Solana Node: Basic client, no MEV optimization.
• Jito Node: Mainstream choice, supports Bundles service.
• Paladin Node: Jito improved version, providing fairer transaction ordering.
• Firedancer Node: a high-performance client that may gain a larger market share in the future.

Client competition mainly revolves around fairness and performance. In the future, high-performance clients may become the mainstream choice.

7. The Layout of Large Institutions on Solana

Taking Sol Strategies as an example, its layout path includes:

1. Acquire nodes to expand market share and ecological dominance.
2. Promote the adjustment proposal of the inflation rate to consolidate the dominance of major nodes.
3. Promote the listing of Solana ETF, expand the staking volume, and compete for the dominant power in Blockchain governance.

This demonstrates how institutions penetrate Solana in a comprehensive manner from technology, governance to financial systems, competing for the sovereignty of blockchain governance.