Retweet the original title “Solana plays a new MEV gameplay, atomic arbitrage dominates the trading market, is it a hidden treasure trove or a new sickle”

With individual DEXs beginning to offer personalized priority fee options and anti-sandwich measures, the profits from sandwich attacks on Solana have significantly declined. As of May 6th, this figure has dropped to 582 SOL, whereas just a few months ago, a single sandwich attack by a bot could easily yield an average daily profit of around 10,000 SOL. However, this is not the end of MEV, as a new type of atomic arbitrage is becoming the primary source of trading on the Solana chain.

According to data from sandwiched.me, the proportion of this atomic arbitrage on-chain has reached an exaggerated level. On April 8, the proportion of tips contributed by atomic arbitrage reached 74.12%, and at other times, it basically remained above 50%. In other words, now on the Solana chain, every two transactions may have one used for atomic arbitrage.

But on social media, there is almost no discussion of atomic arbitrage. Is this new type of arbitrage opportunity really a hidden treasure trove? Or is it another fancy sickle.

Atomic arbitrage, a new approach to MEV trading

First, let’s understand what atomic arbitrage is. Atomic arbitrage refers to performing arbitrage operations involving multiple steps in a single, atomic blockchain transaction. A typical atomic arbitrage involves buying a certain asset at a lower price on one decentralized exchange (DEX) in the same transaction, followed by selling the asset at a higher price on another DEX. Since the entire process is encapsulated in a single atomic transaction, it naturally eliminates the counterparty risk and partial execution risk present in traditional cross-exchange arbitrage or non-atomic arbitrage. If the trade is successful, the profit will be locked in; if the trade fails, apart from losing the trading fees, the arbitrageur’s asset status will revert to its original state, avoiding the situation of only completing the purchase without the sale.

Atomicity is not a feature designed for arbitrage, but an inherent basic attribute of blockchain to ensure state consistency. Arbitrageurs cleverly leverage this guarantee, bundling operations (buying, selling) that originally require step-by-step execution and carry execution risks into an atomic unit, thereby eliminating execution risks at the technical level.

Sandwich attacks or automatic trading bots have traditionally focused on the same trading pair, identifying profitable opportunities. Then, by packaging trades, they sandwich opponents’ trades in the middle or simply send trades in quick succession to create opportunities. Atomic arbitrage, on the other hand, essentially utilizes the method of packaging trades but places more emphasis on identifying price differences among multiple liquidity pools to seize arbitrage opportunities.

Myth of Profits and Brutal Reality

From the current data, this atomic arbitrage seems to have a good profit margin. In the past month, atomic arbitrage on the Solana chain has earned 120,000 SOL (worth about $17 million), and the most profitable address only spent 128.53 SOL, resulting in a profit of 14,129 SOL, with a return rate of 109 times. The largest single profit, only spent 1.76 SOL, earned 1,354 SOL, with a single return rate of 769 times.

Currently, there are 5656 atomic arbitrage robots in the statistics, with an average income of 24.48 SOL (3071 USD) per address, and an average cost of about 870 USD. This figure seems to be not as high as the previous sandwich attacker, but it seems to be a decent business after all, with a monthly return rate of 352%.

However, it is worth noting that the costs shown here are only the costs of on-chain transactions. Atomic arbitrage requires more investment behind it.

According to the web information provided by a MEV developer, there are several hardware requirements for executing atomic arbitrage, including a private RPC and a server with 8 cores and 8GB of memory. From a cost perspective, the cost of the server is approximately between $100 and $300 per month, while the minimum cost of setting up a private server is around $50 per month. The overall monthly cost ranges from around $150 to $500, and this is just the minimum threshold. In addition, in order to arbitrage faster, it is usually necessary to configure servers with multiple IP addresses at the same time.

From the example, it can be seen on a certain atomic arbitrage deployment website that in the past week, only 15 addresses have profits exceeding 1 SOL, with the largest being 15 SOL, while the profits of the others in the week are all below 1 SOL, and many are still in a loss state. And if we consider the costs of servers and nodes, basically, all the robots on this platform may be in a loss state. It is also clear that many addresses have chosen to stop arbitrage.

Who is making a profit? Unraveling the ‘risk-free’ arbitrage mystery

Of course, in reality, it seems to conflict with big data. From the overall data, the robots performing atomic arbitrage on Solana are still in a profitable state. This is also subject to the ‘Pareto principle’, where a few high-level arbitrage robots have gained a lot of profits, while others still remain as newbies.

Looking back at the overall logic of atomic arbitrage, it is not difficult to find that the most important point to achieve profitability is to discover arbitrage opportunities. Taking the most profitable arbitrage as an example, this trade initially purchased 3679 grok tokens for 2.13 SOL (priced at approximately $0.08 each) and then sold them for $199,000 (priced at approximately $54.36 each). Obviously, this successful arbitrage also seized a loophole in a trading pool with scarce liquidity, attracting a large buyer who did not pay attention to the depth of the pool.

But essentially, these opportunities are rare, and because bots on the chain are almost always watching similar opportunities. Therefore, these occasional large arbitrage opportunities are more like winning the lottery.

The recent rise of atomic arbitrage may be due to some developers packaging this arbitrage opportunity as a risk-free business for novices, developing a free version for them to use and providing tutorials. They only take a 10% profit share when profiting from arbitrage. In addition, these teams also charge subscription fees for assisting in building nodes and servers, as well as providing more IP services.

In fact, due to the shallow understanding of technology by most users, the arbitrage opportunity monitoring tools used are similar. This ultimately results in little profit and inability to cover basic costs.

According to PANews’ observation, unless you have a certain technical foundation, unique arbitrage monitoring tools, and high-performance servers and nodes, most players who want to participate in atomic arbitrage are just changing from being cut in speculation to buying servers and being swindled by subscription fees. As more and more people participate, the probability of arbitrage failure is also increasing. Taking the program with the highest yield on sandwiched.me as an example, the current transaction failure rate of the program has exceeded 99%, which means that basically all transactions have failed, and the participating robots still have to pay on-chain fees.

Before diving into this seemingly attractive wave of ‘atomic arbitrage,’ every potential participant should maintain a clear mind, fully assess their resources and capabilities, be vigilant against the overly packaged ‘risk-free’ promises, and avoid becoming another wave of ‘leeks’ in this new ‘gold rush’.

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