Liquid Stake with compassSOL for an 7.15% APY from staking, MEV + fees
Enjoy the freedom of liquid staking in Solana Defi while delegating your stake to the high performance Solana Compass validator. Stake or unstake at any time here, or with a Jupiter swap.
Benefit from our high staking returns and over 2 years experience operating a Solana validator, and receive additional yield from priority fees + MEV tips
Earn 6.5% APY staking with Solana Compass
Help decentralize and secure the Solana network delegating your stake to us and earn an impressive 6.5% APY yield on your SOL, while supporting us to create new guides and tools. Learn more
Stake your SOL
- Click to connect your wallet
- Enter the amount you wish to stake
- Kick back and enjoy your returns
- Unstake from your wallet or our staking dashboard
Earn 6.5% APY staking with Solana Compass
Help decentralize and secure the Solana network delegating your stake to us and earn an impressive 6.5% APY yield on your SOL, while supporting us to create new guides and tools.
Breakpoint 2024: Fireside: WTF Is MEV and Why Should We Care?
By breakpoint-24
Published on 2024-09-21
Experts discuss Maximal Extractable Value (MEV) on Solana, its implications, and potential solutions
MEV, or Maximal Extractable Value, is a hot topic in the Solana ecosystem. At Breakpoint 2024, industry experts Zano Sherwani from Jito and Ben Coverston delve into this complex subject, revealing its potential to become a multi-billion dollar sector in DeFi over the next decade.
Summary
Maximal Extractable Value (MEV) is an intrinsic property of blockchain systems, particularly those with rotating block proposers like Solana and Ethereum. It refers to the value that can be extracted by controlling the ordering of transactions within a block. While often viewed negatively, MEV is not inherently malicious but rather a natural occurrence in blockchain systems.
The discussion highlights the current state of MEV on Solana, with approximately half a billion dollars in MEV generated for the network. This figure is expected to grow significantly in the coming years. The experts emphasize the importance of optimizing user experience and pricing in the face of MEV, suggesting that decentralized exchanges should aim to be as competitive as centralized ones.
The role of stakers in mitigating negative MEV practices is explored, with a call for increased vigilance and alignment with validators who prioritize user benefits. The speakers also touch on potential future developments, including proposals for multiple concurrent block proposals and atomic account coordination (AAC) execution, which could help address some of the challenges posed by MEV.
Key Points:
Understanding MEV
MEV, or Maximal Extractable Value, is an inherent characteristic of blockchain systems where block proposers have the power to capture value by controlling transaction ordering. This can manifest in various ways, such as snatching up all NFTs in a mint or manipulating market trades. While MEV is often perceived negatively, it's not necessarily malicious but rather a natural consequence of how blockchains operate.
The experts argue that instead of trying to eliminate MEV entirely, the focus should be on improving user experience and ensuring fair pricing. This approach aims to make decentralized exchanges as competitive as their centralized counterparts, providing users with the best possible execution prices for their trades.
The State of MEV on Solana
Currently, Solana is experiencing about half a billion dollars in MEV generation for the network. This figure, while substantial, is considered a lower bound and is expected to grow significantly in the coming years. As Solana continues to attract more users and see exciting developments, the MEV sector within DeFi is projected to become a multi-billion dollar industry over the next decade.
The discussion highlights how validators on Solana have realized the value of transaction information they receive before it lands on the chain. Some validators pass this information to "searchers" who bid on MEV opportunities, competing to return the most value to validators and stakers.
The Role of Stakers in MEV Mitigation
Stakers play a crucial role in the Solana ecosystem and have the power to influence network behavior through their staking choices. The experts emphasize the importance of stakers being aware of the validators they're supporting and ensuring alignment with their values. By staking to validators who prioritize user benefits and avoid malicious practices like transaction leaking and sandwiching, stakers can contribute to a healthier network ecosystem.
Stake pools are highlighted as a solution for retail stakers who may not have the resources to monitor validators closely. These pools take on the responsibility of vetting validators and ensuring they align with specific goals, whether that's maximizing yield or prioritizing ethical practices.
Future Developments and Solutions
The discussion touches on several potential developments that could address MEV-related challenges in the future. Multiple concurrent proposal systems are mentioned as one possibility. However, the experts seem most excited about Atomic Account Coordination (AAC) execution, which they believe could be a significant improvement over Solana's current block propagation system.
Other potential solutions include developing better decentralized exchanges with improved mechanism designs, such as order books or request-for-quote systems, which could make it harder to front-run trades. The experts also mention the possibility of reducing slot times to as low as 20 milliseconds, which could enhance censorship resistance and make the network more competitive with centralized exchanges.
Facts + Figures
- Solana is currently generating about half a billion dollars in MEV for the network
- MEV is expected to become a multi-billion dollar sector in DeFi over the next decade
- Some validators on Solana pass transaction information to "searchers" who bid on MEV opportunities
- Staking is described as "exciting" due to its potential to influence network behavior
- Proposals are being discussed to reduce Solana's slot times to as low as 20 milliseconds
- The Firedancer team is working on significantly reducing slot times on Solana
- Solana's block propagation through Turbine is seen as a step-function improvement over previous networks
- The Solana validator community is praised for its ability to coordinate globally during network outages
- Multiple concurrent proposals and atomic account coordination (AAC) execution are being explored as potential solutions to MEV-related issues
- Better decentralized exchange designs, such as order books or RFQ systems, are suggested as application-layer solutions to MEV
Top quotes
- "MEV is a naturally occurring property of blockchains and any system that requires consensus on the sequencing of events as they happen."
- "Over the next decade, I expect this to be a multi-billion dollar sector in DeFi."
- "As a staker, if you believe that certain activities are malicious, then you should not stake to validators or stake pools that allow that specific type of activity."
- "If you're trying to actually ensure long-term prosperity on the network, you actually want to engage in behavior that benefits your users."
- "I think Solana's got some of the best validator operators in the ecosystem, or across crypto period."
- "This is a conscious trade-off of decentralization. In the centralized world, we solve a lot of these problems with things like law and regulation."
- "Part of the value proposition of decentralized networks is we actually solve these problems without having to trust anyone."
- "I think some combination of lowering slot times and hopefully in the future figuring out a mechanism that at least in my opinion, I like multiple concurrent proposals a lot in my opinion."
Questions Answered
What is MEV and why is it important?
MEV, or Maximal Extractable Value, is an intrinsic property of blockchain systems where block proposers can capture value by controlling transaction ordering. It's important because it affects user experience, pricing, and the overall efficiency of decentralized markets. Understanding MEV is crucial for developing more competitive and fair decentralized financial systems that can rival centralized exchanges.
How much MEV is currently generated on Solana?
According to the experts in the video, Solana is currently generating about half a billion dollars in MEV for the network. However, this figure is considered a lower bound, and the actual amount could be higher. The MEV sector on Solana is expected to grow significantly, potentially becoming a multi-billion dollar industry within the next decade as the network continues to attract more users and develop new features.
What role do stakers play in mitigating negative MEV practices?
Stakers have a significant role in mitigating negative MEV practices by being vigilant about which validators they support. By choosing to stake with validators who prioritize user benefits and avoid malicious practices like transaction leaking and sandwiching, stakers can influence network behavior. Stake pools are recommended for retail stakers as they take on the responsibility of monitoring validators and ensuring alignment with specific goals, whether that's maximizing yield or maintaining ethical practices.
What are some potential solutions to MEV-related issues on Solana?
Several potential solutions to MEV-related issues on Solana are being explored. These include:
- Multiple concurrent proposal systems
- Atomic Account Coordination (AAC) execution
- Developing better decentralized exchanges with improved mechanism designs
- Reducing slot times to as low as 20 milliseconds
- Implementing order book or request-for-quote systems at the application layer
These solutions aim to enhance censorship resistance, improve transaction ordering fairness, and make the network more competitive with centralized exchanges.
How does MEV affect user experience on Solana?
MEV can significantly impact user experience on Solana, particularly in trading scenarios. Negative MEV practices like sandwiching can result in users getting filled at the worst possible prices, creating an inefficient market. This can drive users away from the network if not addressed. The experts emphasize the importance of optimizing for the best user experience, which includes ensuring users get fair pricing and efficient trade execution comparable to centralized exchanges.
On this page
Related Content
Breakpoint 2023: Open Source Endeavors on Solana
Explore the significance of open-source development and its impact on the Solana blockchain ecosystem, as discussed by Rex from Magic Eden.
Breakpoint 2023: Check the Chain Bro
George Harrap discusses vital metrics and developments in the blockchain space, emphasizing decentralization and ecosystem growth.
Breakpoint 2024: Debate: The Solana Foundation Should Be Dissolved
A thought-provoking debate on the future of the Solana Foundation at Breakpoint 2024
Breakpoint 2023: A World in a Grain of Sand: State Compression on Solana
Exploring the possibilities of blockchain scalability with state compression technology on Solana.
Breakpoint 2023: Fundraising in a Bear Market
A panel discussion with venture capitalists and founders on the challenges and strategies of fundraising in the 2023 bear market.
Breakpoint 2023: Fuzzing, Formal Methods, and the State of Solana Security
An exploration of how fuzzing and formal verification techniques contribute to the security of the Solana blockchain.
Breakpoint 2023: Removing the Risk from DeFi
Former CEO of Amulet addresses the risks in DeFi and proposes a solution inspired by successful FinTech models.
Breakpoint 2023: Soonerâ„¢ Climate Challenges and Opportunities of Blockchain
An exploration of climate challenges and potential roles of blockchain technology for a sustainable future.
Breakpoint 2023: Veep or House of Cards? How Washington Makes Decisions
A deep dive into the mechanics of decision-making in Washington, debunking misconceptions and highlighting the human aspect of politics.
Breakpoint 2023: Harnessing The Power Of Distributed GPUs with Render Network
Render Network reveals its impact on the creative industry, expansion to Solana, and future of GPU-powered content creation.
Breakpoint 2023: Under The Hood: Wallets and The Tech That Powers Them
An insightful peek into the Solana ecosystem's wallets and the innovative technologies ensuring both safety and user convenience.
Breakpoint 2023: ZK on Solana: Private Solana Programs
An exploration of zero-knowledge proofs for enhanced privacy on the Solana blockchain.
Breakpoint 2024: Product Keynote: In the Blink of an Eye
Chris Osborn introduces Blinks, a revolutionary technology changing how we interact with the internet
Breakpoint 2023: Reviving DeFi on Solana with Composability and Asset Backed Perpetuals
Zoheb Shahzan of Flash Trade delves into how asset-backed perpetuals and composability are reviving DeFi on Solana.
Breakpoint 2023: Solang: Running Solidity Natively on Solana
An introduction to Solang, a tool that compiles Solidity code to run natively on the Solana blockchain.
- Our Validator
- Borrow / Lend
- Liquidity Pools
- Token Swaps & Trading
- Yield Farming
- Solana Explained
- Is Solana an Ethereum killer?
- Transaction Fees
- Why Is Solana Going Up?
- Solana's History
- What makes Solana Unique?
- What Is Solana?
- How To Buy Solana
- Solana's Best Projects: Dapps, Defi & NFTs
- Choosing The Best Solana Validator
- Staking Rewards Calculator
- Liquid Staking
- Can You Mine Solana?
- Solana Staking Pools
- Staking On Solana
- How To Unstake Solana
- How To Unstake Solana
- How validators earn
- Best Wallets For Solana