Solana Sunday: Jito-Solana Goes Open Source
Maximal extractable value, or MEV, is widely considered to be a double-edged sword for investors and blockchain developers. In theory, MEV allows users to optimize the amount of profits that they receive from block transactions; however, these actions can create network instability that has the potential to ruin a blockchain if too many users begin using MEV to their personal advantage.
To help keep these issues mitigated, Jito-Solana - the team behind the first Solana MEV dashboard, have announced that their project will now be going open-source in an effort to reduce risks and provide additional stability to the Solana ecosystem while still exercising the benefits created by MEV strategies.
What is Jito-Solana
Jito-Solana is a validator client that allows users to operate nodes on the Solana network. This is necessary for the network to grow and expand because it gives an interface to users so that they can process and validate block transactions.
The Solana blockchain uses a proof-of-stake consensus mechanism so the network requires nodes to validate transactions in order to operate. As such, Jito-Solana provides necessary assistance as the network expands.
In an effort to be the most attractive client service, Jito-Solana offers features that allow users to earn the most through MEV strategies which provide validators with additional incentives to become the most efficient node on the network.
What is MEV
Maximal extractable value is a term that refers to the amount of additional revenue that can be acquired beyond standard block rewards. It can be compared to min-maxing stats in an effort to receive the largest payout from the smallest contributions which can lead to massive profits if done correctly and with the appropriate amount of liquidity.
One of the most common examples of MEV is through DEX arbitrage which is when a digital asset is bought on one decentralized exchange for a certain price and sold on a separate DEX for a separate price that results in a small profit.
Sandwich attacks, flash loans, and DeFi liquidations are other examples of how MEV can occur and, while beneficial to the individual, present a serious issue to the network as a whole if abused too often.
Problems with MEV
One of the primary ways that MEV can harm a network is through increased network congestion. MEV strategies encourage the creation of bots to maximize the efficiency of finding the right time to initiate a transaction with MEV. By doing so, this causes the network to slow down due to increased activity, burdening ordinary users.
This problem is especially highlighted on the Solana network where gas fees and transaction times are so efficient that it is easier for bots to initiate trades. As we’ve seen earlier in the year, these types of congestion can cause serious harm to the network and has caused it to shut down more than once.
Why Open Source is important
By going open-source, Jito-Solana is killing two birds with one stone which is exceptionally favorable to the Solana network.
First, open-source will allow the community to make amendments to the validator client to help keep it secure which is important because of the inherent risk of spam and network congestion created by MEV. Reducing these issues will help keep MEV efficient for validators without harming the network.
Secondly, an open-source project falls more in line with the philosophy of blockchain technology which is transparent and public by nature. By becoming open-source, a wider range of users are able to help the client adapt to the evolving nature of web3 with incentives created through smart contracts so that their work is not done without reward.
