Behind the soaring price of Meme Coin WIF: the bloody and tearful history of a giant Whale being Arbitrage by MEV

Original author: Jito Foundation

Original compilation: Deep Tide TechFlow

Recently, the meme coin WIF on Solana has skyrocketed.

It seems that every time the meme skyrockets, everyone will envy the whales who catch the news in advance or eat the 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, the risk is equal for every user. Sometimes, it’s more introspection and admonition than envy.

On January 10, 2024, a Whale made a major trading error while trading WIF, resulting in millions of dollars flowing into the hands of arbitrage bots, Jito validators, and their holders.

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

On January 10, 2024, the Address 5qYuZ9ZLShLB1MuV83xHRcTgVA9A5pUajnQUUcPbk3bf (zer 0x trading.sol) made a costly mistake by transferring millions of dollars from their hands to Arbitrage bots, Jito validators, and their holders.

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

One-minute candlestick chart of WIF

What happened?

At the 241056629 Slot slot, zer 0x trading.sol issued a trade that had a huge price impact on the WIF market on Solana. Traders 2Fa st utilize Jito’s Block Engine to send a bundle that atomically captures this Arbitrage. The bundle is executed on Figment’s validator. 2Fa st ended up making a profit of $1.9 million, offering a total of 890.42 SOL ($89, 000) to Figment’s validators and stakers. 2Fa st had limited funds and ultimately did not capture all arbitrage opportunities.

Editor’s note: A bundle usually refers to a set of transactions that are merged together. This practice allows traders to execute multiple trades at the same time to optimize their trading strategies or take advantage of specific opportunities in the market. A slot usually refers to a position in a specific period of time or sequence that is used to process a transaction or data

In the same Block, pUEsyy made a transaction to Arbitrage the WIF via the SOL→ BONK → WIF → SOL. He turned 6.4 SOL into 132.81 SOL. In the next few blocks, a large number of bots poured in to grab arbitrage opportunities.

In the next 50 blocks (within 24 seconds) of a WIF-related transaction, the following happens:

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

The three highest-paid validators are:

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

Since there are more than 500 transactions touching the WIF Token in these 50 blocks, I will skip the specific description of each arbitrage transaction. If you want to dig deeper, you can check out this spreadsheet generated using code. I highly recommend that you go through this data, as there are over 572 WIF transactions involving 69 unique Arbitrage, with several Arbitrage earning more than $100,000. Let’s go through a few charts to understand what’s going on overall, as it ends up generating extremely high profits for those traders, Jito-Solana validators, and their stakers.

Data Observations

In the graph above, the number of bundles per slot (which will only be chained if successful) versus the number of unbundled successes and failures is shown. By comparing the blue vs. red data, we can see that a large number of arbitrageurs who exploit bundles react quickly. There were a few gaps here where the leader at the time didn’t run Jito-Solana, so no bundles landed. Over time, more and more bots perceived this opportunity and began to close more transactions on the WIF marketplace.

The diagram above contains a breakdown of the compute units for each block. There is a difference between the units of computation between validators and the amount of computation dedicated to executing WIF transactions as a function of all non-voting transactions. In fact, about 13% of the total amount of non-voting computation is spent on WIF-related transactions in these blocks.

In about 50 slots, more than 2, 286.5 SOL were paid through WIF transactions, generating about $228, 650 in revenue for validators and their holders in 24 seconds. The most profitable validators include:

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

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

Summary

The rapid growth of MEV on Solana is a perfect example of how a small number of transactions can generate tremendous revenue for MEV Arbitrage, validators, and token holders. This condition is also preventable.

Anyone who wants to make such large-scale trades should make sure to understand the impact of their trades on the price. If your trade has a large impact on the price, spread it out across many smaller buy and sell and let the arbitrage bot handle the price imbalances that may arise.