Undercurrents in Solana: The Capital Game Behind MEV Monopoly

In the past year, the Memecoin craze has made Solana a platform that traders flock to. However, the real surefire profit-making business is not on the trading charts, but hidden deep within the blockchain in the form of MEV (Maximum Extractable Value).

Compared to publicly visible trading profits, the profits from MEV are often hidden within the block construction and sorting mechanisms, typically controlled by the behind-the-scenes forces that possess on-chain power and infrastructure. This system has a high entry barrier, extreme information asymmetry, and highly centralized control, making it relatively unknown.

While ordinary users are still using programs to front-run the on-chain trades and prevent being trapped, MEV bots are already manipulating transaction ordering behind the scenes, precisely capturing arbitrage opportunities. As retail investors compete in speed and strategy, large institutions with staking advantages and node permissions have long secured their position at the top of the profit pyramid with structural advantages.

In the Solana ecosystem, MEV is not just a trading opportunity, but a power of infrastructure level. It is controlled by a very small number of people, forming a capital game with high thresholds, high monopolies, and high profits. This article will reveal the insider story of the big business of MEV on Solana.

1. Definition and Types of MEV

MEV refers to the additional profits that block producers can obtain by including, excluding, or reordering transactions. Due to the Memecoin craze and the activity in DeFi, the scale of MEV is enormous.

The main types of MEV include:

• Liquidation: Liquidating near-default loan positions to earn rewards
• Arbitrage: Utilizing price differences between different DEXs for arbitrage.
• Sandwich Attack: Inserting buy and sell orders before and after the target transaction to profit.

From the perspective of operation, MEV is mainly divided into front-running ( and back-running ).

2. The Scale of MEV on Solana

According to the Helius report, 90.44 million successful arbitrage trades were identified on the Solana network in the past year, with an average profit of $1.58 per trade and a maximum single trade profit of $3.7 million. This generated a total profit of $142.8 million, of which 88.7% was denominated in SOL.

As network activity rises and the Memecoin craze of 2024 approaches, MEV earnings on Solana have surged dramatically. MEV has become a huge source of profit.

3. The Specificity of Solana MEV and the Dominance of Jito

The MEV on Solana is more intense and centralized compared to Ethereum, which stems from its underlying design. Solana is known for its high performance, but it sacrifices some decentralization, leading to a high concentration of power.

Solana does not have a public memory pool, and other nodes must obtain data by connecting to the current block producer. This gives the block producer significant power, lacking a check-and-balance mechanism, exacerbating the MEV problem.

Jito is the MEV powerhouse of Solana. By the end of 2024, over 94% of Solana validators will be using the Jito-Solana client, establishing an absolute dominant position. Jito has built a complete MEV profit closed loop by providing transaction bundling (Bundles) services and staking mechanisms.

4. Core Features of MEV

1. Information advantage determines victory or defeat: whoever can quickly discover arbitrage opportunities and accurately submit transactions will earn profits. This requires fast information synchronization and on-chain trading capabilities.

2. The Bundle service has a monopoly: Jito needs to cover as many block time slots as possible to provide stable service. Once the critical point is reached, the network effect self-reinforces and is difficult to shake.

3. High capital barriers: Solana uses a PoS mechanism, where the larger the staking amount, the higher the block production probability. Large nodes have information and transaction advantages, leading to capital centralization.

5. MEV Revenue Flow

The MEV earnings on Solana mainly flow to three parties:

1. Jito Protocol: Earn transaction fee sharing as infrastructure, with an annual yield of approximately 35 million USD.

2. High-quality Staking Nodes: These have a higher block generation probability, earning generous block rewards and transaction fees. Some nodes can achieve an annualized return of over 20%.

3. Block space sales intermediary: Purchase on-chain transaction permissions from high-staking nodes, package multiple user transactions to obtain price differences, and embed their own arbitrage transactions.

6. Solana Client Competitive Landscape

The main clients currently include:

• Official Solana node: basic client, almost marginalized
• Jito Node: Dominant position, supports MEV optimization
• Paladin Node: Jito improved version, providing a fairer trading mechanism
• Firedancer node: high-performance client developed by Jump Crypto

In the future, client competition may shift from "whether to support Jito" to "whether performance can meet network demands."

7. The Solana Layout Strategy of Large Institutions

Taking Sol Strategies as an example, its layout path:

1. Acquire nodes to expand market share
2. Promote governance proposal to adjust the inflation mechanism
3. Promote the listing of Solana ETF and become an ETF staking provider.

This demonstrates how institutions penetrate the Solana ecosystem in a comprehensive manner, from technology and governance to the financial system, vying for blockchain governance sovereignty.

In summary, MEV on Solana is a highly concentrated and profitable monopolistic business. As the ecosystem develops, the competition in this field will become increasingly fierce and is worth ongoing attention.