Author: Frank, PANews

As various DEXs begin to offer personalized priority fee options and anti-sniping measures, the profits from sandwich attacks on Solana have significantly declined. As of May 6, this figure has dropped to 582 SOL, whereas just a few months ago, a single sandwich attack bot could average daily earnings of around 10,000 SOL. However, this is not the end of MEV; a new type of atomic arbitrage is becoming the primary source of transactions on the Solana chain.

According to data from sandwiched.me, the proportion of atomic arbitrage on-chain has reached an exaggerated level. On April 8, the tip contribution from atomic arbitrage reached 74.12%, and at other times, it has generally maintained above 50%. This means that for every two transactions on the Solana chain, one may be for atomic arbitrage.

However, there is almost no discussion about atomic arbitrage on social media. Is this new type of arbitrage opportunity a hidden treasure? Or is it just another fancy scythe?

Atomic Arbitrage, A New Approach to MEV Trading

First, let's understand what atomic arbitrage is. Atomic arbitrage refers to executing a multi-step arbitrage operation within a single, atomic blockchain transaction. A typical atomic arbitrage involves buying an asset at a lower price on one decentralized exchange (DEX) and then selling it at a higher price on another DEX within the same transaction. Since the entire process is encapsulated in a single atomic transaction, it naturally eliminates counterparty risk and partial execution risk present in traditional cross-exchange arbitrage or non-atomic arbitrage. If the transaction is successful, the profit is locked in; if it fails, aside from losing the transaction fee, the arbitrager's asset status will revert to its original state, avoiding situations where the buy is completed but the sell is not.

Atomicity is not a feature designed for arbitrage but rather an inherent property of blockchain to ensure state consistency. Arbitragers cleverly leverage this guarantee to bundle operations (buying and selling) that would typically need to be executed in steps and carry execution risks into a single atomic unit, thus eliminating execution risk at a technical level.

In the past, sandwich attacks or automated trading bots focused on finding profitable opportunities within the same trading pair. They would package transactions to sandwich the opponent's transaction in between or simply send transactions in a front-and-back manner to create opportunities. Atomic arbitrage, in essence, also utilizes packaged transactions but places more emphasis on discovering price differences across multiple trading pools to seize arbitrage opportunities.

The Myth of Huge Profits and Harsh Realities

Current data suggests that atomic arbitrage seems to have a decent profit margin. Over the past month, atomic arbitrage on the Solana chain has yielded 120,000 SOL (worth about $17 million), with the most profitable address spending only 128.53 SOL, achieving a profit of 14,129 SOL, resulting in a return of 109 times. The largest single profit was made with just 1.76 SOL, earning 1,354 SOL, with a return rate of 769 times.

Currently, there are 5,656 atomic arbitrage bots in the statistics, with an average profit of 24.48 SOL ($3,071) per address and an average cost of about $870. While this figure may not be higher than previous sandwich attackers, it still represents a decent business, as the monthly return rate can reach 352%.

However, it is worth noting that the costs displayed here only reflect on-chain transaction costs. Atomic arbitrage requires more investment behind the scenes.

According to information from a certain MEV developer's webpage, the hardware requirements for executing atomic arbitrage include a private RPC and an 8-core 8GB server. From a cost perspective, the server costs about $100 to $300 per month, while setting up a private server requires at least around $50 per month. Overall, the monthly cost ranges from $150 to $500, and this is just the minimum threshold. Additionally, to conduct arbitrage more quickly, multiple IP address servers are often needed.

From examples, on a certain atomic arbitrage deployment site, it can be seen that in the past week, only 15 addresses earned more than 1 SOL, with the highest being 15 SOL, while many others earned less than 1 SOL and some were in a loss state. When factoring in server and node costs, it appears that most bots on this platform may be operating at a loss. It is also evident that many addresses have chosen to stop arbitraging.

Who is Profiting? Unveiling the "Guaranteed Profit" Arbitrage Illusion

Of course, reality seems to conflict with big data; overall, the bots conducting atomic arbitrage on Solana are still in a profitable state. This is also constrained by the "80/20 rule," where a small number of high-level arbitrage bots capture a large share of the profits, while others remain as new "victims."

Looking back at the overall logic of atomic arbitrage, it is not difficult to find that the most crucial point for achieving profit lies in discovering arbitrage opportunities. Taking the most profitable arbitrage as an example, this transaction initially used 2.13 SOL to purchase 3,679 grok tokens (at a unit price of about $0.08) and then sold them for $199,000 (at a unit price of about $54.36). Clearly, this successful arbitrage capitalized on a vulnerability in a trading pool with low liquidity, where a large buyer overlooked the pool's depth.

However, such opportunities are rare, and since almost all bots on-chain are monitoring similar opportunities, these occasional large arbitrage chances are more akin to winning the lottery.

The recent rise of atomic arbitrage may be due to some developers packaging this arbitrage opportunity as a guaranteed profit business, creating free versions for novice users to use and providing tutorials, while taking a 10% profit share when arbitrage gains are made. Additionally, these teams charge subscription fees for assisting in setting up nodes and servers, as well as providing more IP services.

In reality, due to most users' limited understanding of technology and the similarity of the arbitrage opportunity monitoring tools they use, the ultimate result is minimal profit that cannot cover basic costs.

From PANews' observation, unless one has a certain technical foundation, unique arbitrage opportunity monitoring tools, and high-performance servers and nodes, most players hoping to participate in atomic arbitrage are merely transitioning from being cut in crypto trading to being scammed by server purchases and subscription fees. As more people participate, the probability of arbitrage failure is also increasing. For example, the program with the highest earnings on sandwiched.me currently has a transaction failure rate exceeding 99%, meaning that almost all transactions fail, while participating bots still have to pay on-chain fees.

Before diving into this seemingly enticing wave of "atomic arbitrage," every potential participant should maintain a clear mind, fully assess their resources and capabilities, and be wary of those overly packaged "guaranteed profit" promises to avoid becoming another wave of victims in this new "gold rush."

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