Solana MEV: A big business that doesn’t jump on the K-line

Author: Maggie Source: X, @0xmaggie5

In the past year, the Memecoin craze has made Solana a gold rush for traders. Countless people chased the skyrocketing and plummeting Meme coins, trying to use Trading Bot to seize the opportunity. But few people realize that the truly profitable business that is sure to make money is not jumping on the candlestick chart, but hidden in the depths of the dark forest of the blockchain. This is MEV (maximum extractable value).

Compared to the publicly visible Bot earnings, MEV's earnings are often hidden in the block construction and sorting mechanism, and it is often controlled by the "invisible hand" that controls the power and infrastructure on the chain. Many people don't know this because the operating threshold of this system is high, the information is extremely asymmetric, and the controllers are extremely concentrated.

When you use Bot to rush the internal market and prevent clamping, MEV catchers control the transaction sorting behind the scenes and accurately capture the arbitrage space; when retail investors compete with hand speed and strategy, large institutions with pledge advantages and node permissions have firmly sat at the top of the income pyramid with structural advantages.

On Solana, MEV is not just a trading opportunity, it is also a power at the infrastructure level - it is controlled by a very small number of people, forming a set of high threshold, high monopoly, and high profit capital games. Today we will reveal the big business of MEV on Solana:.

1. First of all, what is MEV?

MEV is called miner extractable value, which means that miners can include, omit and sort transactions when packaging blocks, so as to earn as much extra income as possible. Due to the Memecoin craze and the active DeFi, MEV is huge.

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

• Liquidation: Liquidation of lending positions on the verge of default to obtain rewards. When borrowers fail to maintain the collateral ratio required for loans in lending agreements, their positions will be eligible for liquidation. MEV searchers monitor these undercollateralized positions on the blockchain and perform liquidations by repaying part or all of the debt in exchange for part of the collateral as a reward.

• Arbitrage: Buy and sell on different DEXs at the same time and profit from the price difference. The simplest arbitrage is when two DEXs have different prices for the same trading pair, and arbitrageurs use a single transaction to earn the difference.

• Sandwich attack: buy before the target transaction and sell it for profit later. Sandwich attack is an arbitrage strategy in the DeFi market. The attacker realizes profit through three atomic bundled transactions: first, the unprofitable front-running transaction pushes up the asset price to the highest level allowed by the victim's slippage, then the victim's transaction is executed at a high level, further pushing up the price, and finally the attacker sells the asset at an inflated price through a buyback transaction (back-run transaction) to offset the initial cost and obtain a net profit.

The distinction between front-run and back-run is generally very clear in terms of behavior

• Front-run:Front-run refers to the MEV searcher identifying another trader's buy or sell order in the memory pool and placing the same order before that trader, profiting from the price impact on the other transaction.

• Post-trading:Post-trading is the counterpart of front-running, a specific MEV strategy that exploits a temporary price imbalance caused by another transaction, which is usually caused by improper routing. Once the user's transaction is executed, the reverse transaction searcher will balance the prices of various fund pools by trading the same asset and ensure profit.

Liquidation is back-run, arbitrage is mostly back-run, and sandwich attack is front-run+back-run. For specific MEV series, you can refer to the Helius report, which has very detailed explanations and examples.

Second, how big is the MEV business?

According to some unverified statistics, last year trading robots made $1.1 billion, pump made $500 million, MEV made $1.5 billion, AMM made $1 billion, and celebrity affiliates such as Trump made $500 million, and nearly $5 billion was taken off the market.

On the Solana network, with the increase in network activity and the arrival of the Memecoin boom in 2024, the MEV revenue on Solana has also risen sharply. From the Helius report, Jito's arbitrage detection algorithm analyzes all Solana transactions, including those outside the jito bundle, and the algorithm has identified 90,445,905 successful arbitrage transactions in the past year. The average profit per arbitrage is $1.58, and the most profitable single arbitrage revenue is $3.7 million. These arbitrages generated $142.8 million in profits, of which $126.7 million (88.7%) was denominated in SOL.

MEV is a big business!

Third, the MEV monopoly on Solana is particularly serious

MEV on Solana is more drastic and centralized than MEV on ETH, which stems from the different underlying designs of their chains.

Solana: High performance --> Sacrifice some decentralization --> High degree of centralization --> High degree of power concentration

Solana is known for its high performance, with a block time of only 400 milliseconds (12 seconds for Ethereum), but its design sacrifices some decentralization, resulting in a high degree of power concentration.

Since there is no mempool on Solana, other nodes must obtain block data and submit transactions by connecting to the validator node that currently produces the block. This design gives the validator node that produces the block great power and lacks checks and balances, resulting in a very serious MEV problem on Solana and a monopoly on revenue.

In contrast, Ethereum's MEV market is more market-oriented. There is a high degree of competition between MEV searchers and block builders, which has depressed the overall MEV revenue.

Jito is Solana's MEV overlord.

In August 2022, Jito launched the Jito-Solana client. In the first nine months, due to low network activity, the adoption rate of Jito-Solana client has been below 10% and MEV rewards are limited. Starting from the end of 2023, the adoption rate has accelerated significantly, reaching 50% in January 2024. By the end of 2024, more than 94% of Solana validators (weighted by stake) use jito-Solana clients, forming an absolute dominant position.

How does Jito work?

The biggest difference between the Jito-Solana client and the official client is that it natively supports the MEV extraction mechanism, and its core function is to provide Bundles service. When a validator runs this client, it is equivalent to joining the jito alliance. The alliance provides a priority execution channel for transactions, and traders submit bundles by paying tips to gain transaction sorting advantages. Therefore, the jito client significantly improves the node's profitability compared to the official client.

1. Jito BundlesJito Bundles allow traders to prioritize the submission and execution of key transactions by bundling transactions and paying tips. This is not only applicable to MEV opportunities, but is also often used for other purposes such as acceleration, batch trading, and transaction anti-pinching. Its core process is as follows: 1. Transaction assembly: traders find arbitrage opportunities and quickly build transactions. 2. Bundle submission: encapsulate transactions into bundles and send them to Jito nodes, with tips to increase sorting priority. These bundles will be transmitted to the block leader by the Jito node. 3. Priority execution: If a jito validator becomes the leader of the current slot, these transactions will be packaged into the block first and executed in the front position. The income will be distributed to the validator and the Jito protocol according to the mechanism.

2. Jito's staking mechanismAs we mentioned earlier, the more money staked on the Jito node, the more TipS and MEV income. Therefore, the Jito nodes need to attract more SOL to stake on them. Therefore, the Jito protocol allows users to stake and share a portion of the node's staking income and MEV income with these users.

To further expand its node stake, Jito launched a staking protocol that allows ordinary users to delegate SOL to Jito nodes and share block rewards and MEV income in proportion. Stakers gain income, nodes increase the probability of block generation, and traders gain priority execution opportunities, forming a complete MEV closed loop of interests

MEV has three key characteristics: information advantage, monopoly effect, and capital barrier

1. MEV is an information war, winner takes allTo compete for MEV opportunities on Solana, the speed and sensitivity of chain information are in milliseconds. Whoever can find the arbitrage space the fastest and accurately enter the transaction into the same/next slot can take the profit. This depends on two points: fast information synchronization capability, which usually requires connecting to the RPC service of large jito nodes; fast transaction on-chain, priority submission of transactions through the Jito Bundles channel, and payment of sufficient Tips.

2. Jito is a monopolistic bundle service, and the key to MEV is "who is the leader". If Jito wants to provide traders with stable and reliable bundle services, it must cover as many leader slots as possible. This requires that its clients have a very high coverage rate in the network to ensure that most rounds are jito nodes producing blocks. Once the critical point is reached, the network effect will be self-reinforced: the more widely adopted, the more stable the service, and the more difficult it is for competitors to shake. This is why jito can quickly consolidate 94% of the client share.

3. Solana's MEV is a capital gameSolana is a PoS chain. The more stakes you make, the higher the probability of becoming a leader. Leaders have the right to sort blocks, so they can naturally get the most MEV and Tips. This brings about highly concentrated capital barriers: large nodes have more pledges, high block frequency, and fast information synchronization; the more sensitive the information, the stronger the arbitrage ability; the price of RPC services of large nodes (even services in the same computer room) has risen sharply, becoming a scarce resource for information entry.

Those who can earn MEV can often only go through the largest nodes with the most capital.

Fourth, the flow of MEV income: Who makes the money?

As mentioned above, the MEV income on Solana is very considerable. So who do these incomes eventually flow to? Mainly to three core stakeholders: Jito protocol itself, large high-pledge nodes, and block space sales brokers.

Jito Protocol: Tax Collector of Infrastructure

In the past year, Jito has processed more than 4.3 billion transaction bundles, generating a total of 5.51 million SOLs in user payment tips. At a SOL price of $140, this means that the additional transactions on the chain guided by jito infrastructure are worth about $7.7 billion. The platform profit sharing between iito and the validator is 3-5%, so the actual income of iito itself is about 200,000-270,000 SOLs, or about 35 million US dollars in the past year.

High-stake Nodes: Privileged Class on the Chain

Since Solana is a PoS chain, nodes with higher stakes have a higher probability of producing blocks. These "head validators" can not only continue to obtain basic block rewards and inflation benefits, but also obtain a large number of transaction tips from Jito Bundles. The normal node income is about 6%. When the network activity is high, the annualized income of some nodes can reach more than 20%, which is much higher than that of ordinary nodes. Its sources of income include: inflation rewards, block reward Jito Tips, and some income from selling SWQoS transaction chain permissions.

Block space sales broker: intermediary for transaction chain

This type of broker plays the role of secondary block space seller. The operating logic is as follows:

*They establish cooperative relationships with high-stake nodes and purchase SWQoS transaction chain permissions at preferential market prices;

(Stake-Weighted Quality of Service SWQoS allows leaders to identify and prioritize transactions from staked validators. In the event of network congestion, SWQoS ensures that transactions from high-stake validators are less likely to be delayed or discarded)

*Package multiple users' transactions into Jito Bundles, and concentrate on increasing Tips to get higher priority;

*The Tips paid by users are much higher than the fees paid by brokers to validators, and brokers earn the difference;

*At the same time, they also embed their own arbitrage transactions (such as Backrun) in the Bundle to further obtain MEV benefits. For example, on Defillama, you can see some of bloXroute's revenue data (link), which shows that the Tips it received are very considerable. However, it should be noted that the data does not cover all of its payment addresses, nor does it exclude the shares distributed to validators and order flow providers.

In general, Solana has a highly centralized power phenomenon, and most of Jito's MEV revenue is captured by the Jito protocol, large validator nodes, and block space sales brokers.

V. Solana's client competition landscape

Currently, there are more than 1,300 validator nodes on Solana, and more than 94% of the nodes are jito nodes. The main clients include the following categories:

Solana node

This is the most basic node client, which does not contain any MEV optimization mechanism. Nodes running this client have almost been marginalized because the income is much lower than nodes running jito.

jito node

The Jito client is based on the official client, with the addition of jito protocol and Bundles support, enabling nodes to accept bundled transactions and collect Tips from them. If users want to achieve preemptive, anti-pinching, fast chaining and other needs, they can submit transactions to validators through the jito Bundle service and attach tips to increase execution priority. Since nodes running the jito client can obtain additional Tips income, more than 90% of the nodes on the current main network have been converted to Jito nodes, becoming the default choice.

Paladin Node

Paladin is an improved version of the Jito client, designed to provide a fairer transaction priority mechanism, mainly to solve the "sandwich attack" problem in Jito's bundle sorting (that is, there are malicious validators who insert sandwich transactions but are not punished). According to community news, the current adoption rate of the Paladin client is about 15%, and because it is still recognized as a jito client by the network, it is included in the 94% total statistics.

Firedancer Node

Developed by Jump Crypto, Firedancer is an independently implemented high-performance Solana client, originally intended to increase network throughput and facilitate Jump's quantitative trading. The initial version did not support the Jito protocol, so it could not access Tips income, and the main network adoption rate was extremely low. However, as the new version becomes compatible with the Jito protocol, validators can also earn JitoTips income by using Firedancer. Although there are few deployments on the mainnet at present, most nodes on the testnet have adopted Firedancer, indicating that it may gain a larger market share on the mainnet in the future. SolanaFoundation also supports it.

Competition logic of these node clients

Jito VS Paladin: Fairness dispute

Due to its high concentration, the Jito protocol has formed a de facto monopoly on MEV extraction. However, the protocol currently lacks a punishment mechanism for malicious behavior (such as validator sandwich attacks), resulting in users who may still be sandwiched even if they use bundles. This just gives clients like Paladin an opportunity. Paladin provides a bidding process for a fairer transaction priority on the chain. However, Paladin was originally modified on jito-solana. If ito improves its mechanism in the future, it may suppress Paladin's living space.

FiredancerVS Other Clients: Performance Replacement

Firedancer's biggest advantage is performance. It claims that TPS can reach 1 million (theoretically 1 million, the actual effect is unknown). If the transaction volume of the Solana network continues to grow in the future, high-performance client nodes that can meet performance requirements will gain an advantage and squeeze low-performance clients. Once high-performance nodes start to pack larger blocks, low-performance clients may not be able to keep up with the synchronization progress, affecting verification performance and eventually being marginalized. Therefore, when our demand for Solana's TPS is higher, it will drive the entire Solana network to naturally migrate to high-performance clients.

In general: the vast majority of nodes on the Solana mainnet run the jito-Solana client, and the Jito protocol has become part of the infrastructure. As the Firedancer client begins to be compatible with the Jito protocol, the mainnet may see iterative upgrades in client performance in the future - from "running jito can make more money" to "running high-performance Jito to avoid being eliminated."

Six, how do large institutions step by step become profit operators on Solana?

Solana's architecture naturally tends to centralize power, which provides a favorable soil for large institutions to intervene and dominate the ecosystem. SolanaFoundation, jito, Multicoin, Jump, Helius, Coinbase, Binance, Jupiter, etc. all have great governance rights on Solana. Many institutions are optimistic about the future prospects of Solana and hope to become one of the profiteers on Solana. Taking SolStrategies, which has been active recently, as an example, we can clearly see how large institutions are taking steps to infiltrate and become the profiteers of Solana:

First step: SolStratagies expands its market share and ecological dominance by acquiring nodes and becomes one of the main players.

Solana's current stake ownership rate is as high as 65.6% (about 380 million SOLs are staked). Controlling the validator nodes means mastering the consensus mechanism and voting rights of the network. SolStrategies acquires head nodes on a large scale and quickly enters the core of power:

• 2024.11:Acquires Cogent Crypto, the verification node operator of Solana, Sui, Monad and ARCH networks, for US$18 million (cash + stock), focusing on the layout of the SOL network.

• 2025.03:Acquires Solana head verification node Laine and Stakewiz.com for 35 million Canadian dollars (cash + equity), increases the number of pledged SOL to 3.3 million (worth about US$388 million), and absorbs Laine founder Michael Hubbard as chief strategy officer.

Step 2: Try to promote the inflation rate adjustment proposal SIMD-228 to further consolidate its power. (This proposal was not passed in the end)

SOLStrategies pushes for the SIMD-228 proposal to adjust the inflation mechanism. This proposal aims to introduce a dynamic inflation mechanism to replace the current fixed deflation model. If the proposal is passed, Solana's annualized inflation rate will drop from a fixed rate of 4.68% to 1% or even 0%. Although the proposal was ultimately not passed, the strategic intention behind it is very clear:

• Solidify the value of SOL: Reducing inflation can reduce the release of new SOLs, ease token selling pressure, and increase the long-term returns of stakers;

• Suppress small nodes and consolidate the dominance of large nodes:Reducing inflation will compress the returns of all validators, but small nodes have weaker risk resistance and are easily eliminated, which is conducive to promoting the network to concentrate on head validators.

Step 3: Profit trading on Solana. Promote the listing of SolanaETF, institutionalize Crypto assets, and become an ETF pledge provider.

SolStrategies becomes the pledge provider of 3iQ Solana StakingETF and promotes the listing of 3iQ Solana Staking ETF. Try to further expand the pledge volume and compete for the dominant power of blockchain governance.

Summary:

1. MEV is a big business. Especially the MEV on Solana is particularly fierce and profitable.

2. Jito, a MEV protocol, is a monopoly protocol with a strong head effect.

3. Power is highly centralized on Solana, and the money of MEV is mainly captured by Jito protocol, high-stake nodes, and block space sales brokers.

4. There are now multiple clients on the Solana network. The Jito-Solana client currently dominates the main network, and the Firedancer client that supports the jito protocol may become a high-performance upgrade in the future.

5. Solana is very suitable for institutional leadership. SOLStrategies has demonstrated how an institution can penetrate Solana from technology, governance to the financial system and compete for blockchain governance sovereignty through actions such as acquiring nodes, trying to promote governance proposals, and promoting ETF listings.