Solana meme frenzy continues; is it good for stress-testing the network?

Fees and activity statistics reflect the widespread usage of Solana as a protocol for meme token creation. Most meme tokens on Solana rely on relatively small liquidity pools, and turning profits often require bots. 

Activity on Solana also boosts the transaction count and fees for Jito Labs, the blockchain’s most widely used MEV bot producer. Jito Labs also works as a validator and has previously produced a full mempool report for Solana transactions. 

Read: Meme token $DADDY performance most likely caused by artificial pump

The important role of Jito Labs coincides with a recent Solana conflict based on exploiting knowledge about the meme pool. The Solana Foundation withdrew its funding from 30 validators that were suspected in injecting frontrunning transactions, which prevented retail traders from earning profits. There are still suspicions that dark mempool data may be used on Solana, with MEV software helping to front-run meme tokens. 

Recently, Jito Labs showed its protocol was among Solana’s top earners, surpassing the main net fees. 

👀Jito is currently generating nearly as much fee revenue as Solana (!)

That's right. @jito_sol, which has 10 employees per LinkedIn is doing almost as much revenue as Solana, the 3rd largest smart contract network with a market cap of $71 billion.

How is this possible?

After… pic.twitter.com/ipwwyyvmYn

— Michael Nadeau (@JustDeauIt) June 13, 2024

Jito Labs earns the most from meme token trading, which is not slowing down. For analysts, meme tokens and bots are also a way to stress-test Solana’s network and ensure it has improved its ability to carry real-time transactions. Higher fees also reflect an inflow of interest and competition to handle transactions for maximum earnings. 

Jito protocol itself states it is against using mempool data to harm retail traders, but remains the most widely used MEV software for Solana validators. At the very least, validators can preferentially include transactions based on the maximum potential revenue. 

Meme token generation boosts Raydium listings

New meme tokens continue to flow into the Solana ecosystem every few minutes. Most of the new offers end up on the Raydium decentralized exchange. The token generation event also coincides with pool formation. 

Pool size varies widely by token, and most assets are unverified. Pools can go as high as 820 SOL, or as low as 6 SOL. A liquidity of 79 SOL is also a usual number for new token issues. New tokens are also extremely risky, with one of the new assets launching and seeing its pool 90% drained within 12 minutes. 

The Raydium exchange has also seen a spike in activity in the past week. Raydium handles more than $546M in decentralized trades each day, and on peak days, volumes expand to $778M. Raydium is unique for offering transparent, immediate listings for brand-new tokens. 

Meme token trading allows for relatively small orders of under 1 SOL. Trading trends shift quickly, and a token’s pool can disappear almost instantly. At least two new tokens rug-pulled in 15 minutes from launch, erasing 100% of their liquidity pools on Raydium. 

Also read: Solana Price Prediction 2024-2030: Is SOL a Good Investment?

Newly minted tokens face the problem of being counterfeited. Typically, automated strategies are used to find good tokens, with small allocations to avoid risk. Top meme tokens are more liquid, with more than $7.9B in market capitalization. Meme tokens are still more volatile, erasing between 25% and 45% of their value after the latest market correction.

Jito Labs may start drawing re-staking traffic

Part of the activity on Jito Protocol also comes from the generation of JitoSOL, an asset based on staked SOL tokens. In the past few weeks, Jito Protocol started to generate re-staking services modeled after Ethereum LRT. 

After introducing native swaps from staked SOL to JitoSOL, Jito Labs may become one of the first and biggest re-staking services.

1/ Unless you have been living under a rock, you should know that you can now convert your $SOL directly to $JitoSOL in your @phantom.

But if didn't know that, here's a link explaining how to do it. 🤝

Full article: https://t.co/78c4RtVt3c pic.twitter.com/jjSHBq0Eaq

— Jito (@jito_sol) June 13, 2024

Re-staking in the Ethereum ecosystem brought an additional layer of economic activity and became one of the growth vectors for DeFi in 2024. Solana may also find a few versions of Eigen Layer, where SOL will have a double effect. 

Re-staking may displace the meme token trend on Solana, turning it into a new tool for retail revenues and charging validators more fees. After a late May upgrade, the Solana network is supposed to offer a more robust consensus mechanism. Solana has not announced new outages for now, though it still has a 20-25% transaction failure rate.

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Cryptopolitan reporting by Hristina Vasileva