The rise of on-chain Arbitrage on Solana, new MEV trading occupies a significant share of the market

Recently, the profits from sandwich attacks on the Solana blockchain have significantly decreased. As of May 6, this figure has dropped to 582 SOL, far below the average daily profit of 10,000 SOL per attack bot several months ago. However, MEV trading has not come to an end; a new type of atomic Arbitrage is becoming the main source of trading on the Solana blockchain.

Data shows that the proportion of atomic arbitrage on-chain has reached an astonishing level. On April 8, the tip contribution from atomic arbitrage reached as high as 74.12%, and during other times, it basically remained above 50%. This means that currently, for every two transactions on the Solana chain, one may be used for atomic arbitrage.

Nevertheless, there is almost no discussion about atomic arbitrage on social media. Is this emerging arbitrage opportunity a hidden treasure or another form of trap?

Atomic Arbitrage: A New Approach to MEV Trading

Atomic arbitrage is a method of executing multi-step arbitrage operations within a single blockchain transaction. Typical operations include buying an asset at a low price on one DEX and then selling it at a high price on another DEX within the same transaction. Because the entire process is encapsulated within a single atomic transaction, it eliminates counterparty risk and partial execution risk found in traditional cross-exchange arbitrage or non-atomic arbitrage.

Atomicity is an inherent fundamental property of blockchain that ensures state consistency. Arbitrageurs cleverly leverage this feature to bundle operations that would normally need to be executed in steps and carry risks into a single atomic unit, thereby eliminating execution risks from a technical perspective.

Unlike traditional sandwich attacks or automated trading bots, atomic arbitrage focuses more on discovering price differences across multiple trading pools to seize arbitrage opportunities.

Returns and Reality

Data shows that in the past month, on-chain arbitrage on Solana has yielded 120,000 SOL (approximately $17 million). The address with the highest profit had a cost of only 128.53 SOL but gained 14,129 SOL, achieving a return rate of 109 times. The maximum single profit cost only 1.76 SOL, earning 1,354 SOL, with a single profit rate as high as 769 times.

Currently, there are 5,656 atomic arbitrage bots recorded, with an average profit of 24.48 SOL (3,071 USD) per address and an average cost of about 870 USD. The monthly yield can reach 352%, which seems like a good business.

However, this data only reflects the on-chain transaction costs, and more investment is required behind atomic arbitrage. Hardware requirements include private RPC and an 8-core 8G server, with monthly costs around $150 to $500. To speed up arbitrage, it is usually necessary to configure servers with multiple IP addresses.

The actual situation may not be as indicated by the data. A certain atomic arbitrage deployment site shows that in the past week, only 15 addresses earned more than 1 SOL, with the highest being 15 SOL, while most others earned less than 1 SOL or even incurred losses. Considering the costs of servers and nodes, the platform's bots may generally be at a loss, and many addresses have stopped arbitraging.

The Mystery of Profit

Despite the apparent contradiction between reality and big data, overall Solana's atomic arbitrage bots remain profitable. However, this also aligns with the "80/20 rule", where a small number of high-level arbitrage bots generate significant profits, while others become the new "victims".

The key to atomic arbitrage lies in discovering arbitrage opportunities. Taking the highest profit trade as an example, it seizes the opportunity created by a liquidity shortage in a certain trading pool, capturing the moment when large players overlook the pool's depth. However, such opportunities are rare, and many bots are competing for them.

Atomic arbitrage has recently emerged, partly because some developers have packaged it as a "guaranteed profit" business, offering free versions and tutorials, charging a 10% share only when profits are made. They also charge subscription fees by assisting in setting up nodes and servers, providing multi-IP services.

However, most users have a limited understanding of the technology and use similar arbitrage monitoring tools, resulting in minimal profits that are hard to cover basic expenses. Unless they have a technical foundation, possess unique arbitrage monitoring tools, and high-performance servers and nodes, participating in atomic arbitrage may just shift from being cut in coin trading to being scammed by server purchases and subscription fees.

As more participants join, the probability of arbitrage failure is also rising. The failure rate of a certain high-yield program's trades has reached over 99%, and participants still need to pay on-chain fees.

Before diving into the seemingly enticing "atomic arbitrage" wave, potential participants should remain clear-headed, fully assess their own resources and capabilities, be wary of overly packaged "sure-win" promises, and avoid becoming another wave of "leeks" under the new type of "gold rush."