It seems like conversations about sandwich attacks on Solana — where advanced traders front-run and back-run trades to extract value at the expense of unsophisticated traders — come and go every few weeks with little resolution. There is a general consensus that sandwiching should be avoided, but no agreement on the best way to solve it.
Ben Coverston of Solana posted to social media this past week that Arsc, the network’s leading sandwich bot, pocketed tokens worth millions of dollar per day through sandwich attacks. Coverston forecast that arsc, should current trends continue, would be Solana’s top staker within the next 1-2 year. One of the researchers’ proposed solutions included the reintroduction a “mempool” staging area for transactions — which Jito got rid of earlier this year in hopes of preventing sandwiching.
Sandwich attackers exploit slippage — the gap between a trade’s expected and executed price. Front-running the transaction is done by placing their trade before the intended target, shifting the price to their advantage. After placing their trade, they reverse the process, thus locking in financial gains from the manipulation of price. In the end, this results in the trader receiving a poorer execution price and subsidizing their attackers’ profit.
Sandwichers are a type of MEV (maximum extractible values) that extracts value from Solana Blocks at the expense less-sophisticated users. Solana’s taken several actions in the last few months to stop sandwiching. Jito Labs, a Solana-based infrastructure company, got rid of their public mempool in March. This was an area that could be used to arrange transactions and generate MEV revenues for validators.
After a while, the attackers continued to attack validators that were sandwiched. Solana Foundation withdrew financial support two months later to validators participating in private pools. Jito blocked a private mempool of validators in September from taking part in the stake pool. This stake pool consists of SOL Jito’s staked software delegates.
The criticism of the Solana Foundation and Jito’s blacklist-the-bad-guys strategy is that it’s essentially playing whack-a-mole: Blacklisted validators can always spin up a new validator and resume sandwiching.
Coverston made a similar proposal in a recent blog. Privatization of mempools reduced the number validators who executed sandwich attacks. However, the remaining few, such as arsc are investing their considerable profits into their operations. It has resulted in a centralization, which is concerning, of Solana that’s been staked by a small group of validators.
Coverston proposes reactivating a mempool. This move could make sandwiching more common, but it can also encourage competition between validators who use these strategies. The increased competition would help distribute MEV profits more evenly, preventing a single group of validators from disproportionately accumulating stake — and power — on the network.
It would be an essentially a reverse of Solana’s anti-sandwiching policy over the last nine months.
Sandwiching is not a big deal in the long term. Ryan Connor of Blockworks Research pointed out that high-frequency strategies are used to attack traders in the US equities markets. This hasn’t prevented equities volumes from reaching all-time records.
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