Lightspeed Newsletter: Solana ecosystem reckons with sandwich attacks

Howdy!

Writing about sandwich attacks all morning has me jonesing for a sandwich, so I’ll share my favorite recent recipe: green apple, brie, and walnuts on a baguette.

The savory and tart combo with a little bit of crunch is just so good. I’m making myself hangry over here. Alright, now on to sandwich attacking, of which I’m much less of a fan:

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Solana ecosystem reckons with sandwich attacks 

The Solana Foundation, a non-profit dedicated to Solana’s growth, recently prevented a host of validators believed to be engaging in so-called sandwich attacks on the network from participating in its Solana Foundation Delegation Program (SFDP).

Sandwich attacks happen when nefarious traders take advantage of pending transactions to manipulate prices and profit at users’ expense. Solana lacks a mempool, or a staging area for unprocessed transactions where sandwich attackers can find targets. To get around this, certain validators run private mempools that allow sandwich attacks to extract money from users.

(Of note, Ethereum has a native mempool, and sandwich attacks are a significant problem for the network. The notorious jaredfromsubway.eth accounted for more than 10% of all ETH gas spent today.)

Basically everyone who isn’t a sandwich attacker agrees that sandwich attacking is bad. And the Solana Foundation’s move itself wasn’t so major: the foundation matches the amount of solana staked with some validators to try incentivizing good staking practices on the network. Blacklisted validators can still run nodes, but the foundation will essentially stop giving them grants. 

Perhaps the bigger consequence is the message the move sent to Solana actors with influence over staking.

The same day the Solana Foundation kicked sandwich attackers from the SFDP, the Jito DAO put up a governance proposal that would create a blacklist of malicious validators and exclude them from Jito’s stake pool — which is by far the largest in Solana. 

In a Tuesday X space discussing the measure, Jito Foundation contributor Andrew Thurman said Jito is “working in concert” with the Solana Foundation, and the two anti-sandwich attacking measures being taken in rapid succession was not a “mistake.”

Besides this, Solana staking analytics platform Stakewiz added disclaimers to 51 validators it found to be participating in private mempools that enable sandwich attacking. One of the disclaimers went to Stakewiz’ third highest-ranked validator.

And Brian Long, co-founder of Solana RPC provider Triton One, told me the firm will be providing infrastructure whereby transaction senders can opt out of sending transactions to a given list of leaders (presumably known sandwich attackers). 

There’s one other interesting piece of fallout here: it’s not publicly known how many validators the Solana Foundation blacklisted or how they went about identifying validators who participate in private mempools — which are by definition not publicly identifiable.

Long said Triton sends small transactions with high slippage to see who sandwich attacks the transaction — essentially going undercover to get sandwich attackers to identify themselves. The Solana Foundation and Jito Labs declined to comment on how they have been identifying malicious validators.

Solana might be trying to slay a hydra by going after sandwich attacks. One Solana core development Discord user said their data suggested bad MEV revenue stayed constant after the blacklistings, with remaining private mempool users grabbing market share from those who lost their delegation.

— Jack Kubinec

Zero In

Shall we call it the MOTHER effect?

DEX protocol Raydium’s volumes popped last week to nearly $10 billion — potentially buoyed by the launch of Iggy Izalea’s MOTHER memecoin, among others.

According to @Ilemi’s Dune dashboard, Raydium volumes have been trending higher since mid-April. Still, last week’s volume breakout didn’t eclipse the DEX’s all-time weekly high of $12.4 billion. 

As with any memecoin, there’s little point in speculating on where things might go for the most speculative cryptocurrency types. But this much is true: these coins are tidy volume generators for DEXs. 

— Michael McSweeney 

The Pulse

The dYdX community voted to approve its v5 upgrade last week. The upgrade is live on the backend, but users will not be able to engage with v5 until later this week, a dYdX spokesperson told Blockworks. 

Previously, dYdX operated with cross-margined markets, where collateral was pooled together, leading to higher risk and potential cascading liquidations in volatile conditions. The new update introduces isolated markets and margins, separating collateral pools for each market. This allows for market-specific risk isolation and improved flexibility, enabling traders to manage their collateral more effectively.

The upgrade also brings features like batch order cancellation, liquidity vaults, and the Slinky price oracle, which provides high-speed, accurate price updates. Additionally, it is now integrated with Raydium, enhancing the protocol’s price oracle capabilities by providing price data on all assets traded on Solana. As a result, traders can now access a broader range of assets for derivatives trading, including those based on Solana, such as memecoins.

The price of DYDX rose to $2.17 on June 6 before the upgrade. However, following the weekend, the price has dropped to $1.68. Nonetheless, it has generated excitement within the community. On social media, users like @Elodie_de and @Elric_crypto highlighted the initial surge in DYDX prices, while others like @Kaylee183843 expressed optimism about further upside, with many anticipating continued growth on the platform.

The dYdX Ecosystem Development Program also announced several initiatives to support the new features and integrations. Notably, Helius Labs will manage two additional dedicated Solana RPC nodes to allow dYdX testnet validators to access Slinky’s Solana price feeds.

— Jeffrey Albus

One Good DM

A message from Jito Foundation contributor Andrew Thurman:

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