Solana Users Pay Millions in Fees to Combat Transaction-Front Running Bots

To counter the disruptions caused by sandwich bots on Solana, users have spent millions of USD to protect their transactions through Jito.

Solana Users Pay Millions in Fees to Combat Transaction-Front Running Bots. Photo: DL News

Solana has recently emerged as a new playground for investors with the explosion of memecoins and token airdrops in recent times. This has attracted a large number of new users, pushing transaction volumes and active wallets on the blockchain to their highest levels in over a year as of March 2024.

7DMA moving average depicting new wallets on Solana. Source: The Block (05/09/2024)

However, alongside this surge, Solana faces the challenge of managing front-running bots using MEV (Maximal Extractable Value) against user transactions.

MEV, short for Maximal Extractable Value, describes the maximum value that miners or validators can extract by ordering transactions within a blockchain block. MEV operates like a game where entities strategically order transactions to maximize transaction fee gains.

According to Blockworks Research, Solana validators earned under $7 million USD from MEV in the first week of May 2024.

Currently, the majority of MEV on Solana stems from the first liquid staking protocol on Solana - Jito. This protocol provides a variant of Solana validator known as Jito-Solana, and according to Jito's website, 78% of Solana validators are using this software.

The disruptive type of MEV bot recently affecting Solana is known as the sandwich bot. This DeFi bot uses MEV to profit by "sandwiching" its transactions between user transactions and the protocol.

Operation of a sandwich bot. Source: Matcha

A sandwich bot buys tokens before your transaction is processed to drive up the token's price. Then, when your transaction is confirmed and the token price has risen, the bot sells the token back to you at a higher price, profiting from the price difference.

The emergence of such bots may be due to the low transaction costs on Solana, allowing bots to afford higher-than-usual gas fees to prioritize their transactions.

Gas fees denominated in SOL on Solana. Source: Solscan (05/09/2024)

In response to the current challenges, Jito has introduced Jito Bundles as a solution to protect users from sandwich bots, charging a small fee of approximately $0.04 USD, referred to as tips, per transaction for private transaction processing.

By using this service, user transactions are processed separately and sent directly to Jito's validator, ensuring no other transactions can interfere before being processed, thereby safeguarding users from sandwich attacks.

However, prior to the launch of Jito Bundles, even Jito was not immune to being attacked by sandwich bots. In March 2024, Jito Labs had to cease supporting the mempool because user transactions waiting in the mempool before being sent to validators could be detected and set up for sandwich attacks.

The popularity of Jito's solution is increasing. In just the first week of May 2024, users spent over 65,000 SOL (over $9 million USD) in fees to protect their transactions. Currently, Jito is the largest protocol on Solana with a TVL (Total Value Locked) reaching $1.4 billion USD.

Amount of tips earned by Jito Bundles. Source: Jito Explorer (05/09/2024)

Lucas Bruder, CEO of Jito Labs, commented: "Sandwiching can yield enormous profits but harms users and the long-term development of the network."

Sandwich bots are not only affecting Solana but also Ethereum and other blockchains. Earlier, an MEV bot named jaredfromsubway earned nearly $300,000 USD, setting profit records by targeting Ethena (ENA) transactions on April 3rd.

Combatting sandwich bots on Solana has become more urgent compared to other networks. This is explained by the higher incidence of sandwich bot attacks on Solana due to the network's low transaction fees. The issue escalated to the point where by late March 2024, 75% of Solana transactions were failing due to network congestion caused by spam bots.

The prevalence of sandwich bots on Solana can also be attributed to the significant trading activity for memecoins, which often have low liquidity and experience large price swings, making them attractive targets for sandwich bots.

Tim Garcia, Head of Validator Relations at Solana, expressed firmness: "Solana will not tolerate any behavior detrimental to users and will permanently remove validators deliberately carrying out sandwich attack transactions."