Behind the sudden rise of Solana’s local dog WIF: the history of blood and tears of a giant whale being arbitraged by MEV

How does MEV on Solana generate huge profits in a short period of time?

Written by: Jito Foundation

Compiled by: Shenchao TechFlow

Recently, the Meme currency WIF on Solana has experienced a surge.

It seems that every time Meme skyrockets, everyone will envy those giant whales who catch the news in advance or eat big meat and their crazy profit multiples; but it turns out that they are not guaranteed to make money.

In the dark forest of the crypto market, risks are equal for every user. Sometimes, rather than envy, we should reflect on ourselves and take warnings.

On January 10, 2024, a major trading error occurred when a whale was trading WIF, causing millions of dollars in funds to flow into the hands of arbitrage robots, Jito validators and their currency holders.

This article provides an in-depth analysis of the incident, showing how the MEV (Miner Extractable Value) on Solana generated huge profits in a short period of time.

On January 10, 2024, address 5qYuZ9ZLShLB1MuV83xHRcTgVA9A5pUajnQUUcPbk3bf (zer0xtrading.sol) made a costly mistake that transferred millions of dollars from their hands to arbitrage bots, Jito validators, and their coin holders.

In one transaction, they exchanged 86,739.1 SOL (worth approximately $8.6 million) for 17,225,407.03 WIF (a popular meme on Solana). Unfortunately, due to low liquidity, this exchange took up the vast majority of the liquidity and the price of WIF increased by 2800% from approximately $0.14 to $3.99. Arbitrage bots on Solana then swarmed to capture arbitrage opportunities and make millions.

WIF’s one-minute K-line chart

what happened?

In Slot 241056629, zer0xtrading.sol issued a transaction that had a huge price impact on the WIF market on Solana. Trader 2Fast leverages Jito’s block engine to send a bundle that captures this arbitrage atomically. The bundle is executed on Figment’s validator. 2Fast ended up making $1.9 million in profit, providing a total of 890.42 SOL ($89,000) to Figment’s validators and stakers. 2Fast had limited funds and ultimately did not capture all arbitrage opportunities.

Editor’s note:

A bundle usually refers to a group of transactions that are combined together. This practice allows traders to execute multiple trades simultaneously to optimize their trading strategy or take advantage of specific opportunities in the market.

A slot usually refers to a specific time period or position in a sequence for processing transactions or data

In the same block, pUEsyy conducted a transaction and performed WIF arbitrage through SOL → BONK → WIF → SOL. He turned 6.4 SOLs into 132.81 SOLs. Over the next few blocks, a large number of bots rushed in to grab the arbitrage opportunity.

Within the next 50 blocks (within 24 seconds) of the WIF-related transaction, the following happened:

• Offer 2,286.5 SOL to Jito validators via bundle
• From the base fee and priority fee, the validator received a fee of 8.53 SOL
• During this period, 13% of total compute units were used to process WIF-related transactions
• 54% of WIF compute units come from failed transactions
• 44% of WIF related transactions failed

The three highest paid validators are:

• Validator.com: 978.95 SOL
• Figment: 890.42 SOL
• Staking Facilities：403.64 个 SOL

Since there are over 500 transactions touching the WIF token in these 50 blocks, I will skip the specific description of each arbitrage transaction. If you want to go deeper, check out this code-generated spreadsheet. I highly recommend you browse the data, as there are over 572 WIF trades involving 69 unique arbitrageurs, with several arbitrageurs making over a hundred thousand dollars. Let’s go through a few charts to understand what happened overall, as it ended up being extremely profitable for those traders, Jito-Solana validators, and their stakers.

Data observation

In the image above, the number of bundles per slot (only uploaded on success) is shown versus the number of non-bundle successes and failures. By comparing the blue to red data, we can see that a large number of arbitrageurs taking advantage of the bundle reacted quickly. There were some gaps here, the leader at the time was not running Jito-Solana, so no bundles landed. As time went by, more and more robots sensed this opportunity and began to complete more transactions on the WIF market.

The image above contains a breakdown of the computing units for each block. There are differences between validators in terms of computational units and the amount of computation dedicated to executing WIF transactions as a function of all non-voting transactions. In fact, approximately 13% of the total non-voting computation is spent on WIF-related transactions in these blocks.

Across approximately 50 slots, over 2,286.5 SOL was paid via WIF transactions, generating approximately $228,650 in revenue for validators and their token holders in 24 seconds. The most profitable validators include:

• Validator.com: 978.95 SOL
• Figment: 890.42 SOL
• Staking Facilities：403.64 个 SOL

Staking Facilities was lucky enough to get two leading slots during this period: 241056636 - 241056639 and 241056660 - 241056663. In their first slot, they received 170.68 SOL. In the second batch of slots, they received 232.96 SOL.

Summarize

The rapid growth of MEV on Solana is a perfect example of how a small number of transactions can generate extremely large revenues for MEV arbitrageurs, validators, and token holders. This situation is also preventable.

Anyone looking to make large trades of this type should make sure they understand the price impact of their trades. If your trade has a large impact on price, spread it out over many smaller buys and sells and let the arbitrage bot handle any resulting price imbalances.