Solana MEV Bot Earns $1.8M Backrunning $9M WIF Token Trade

A Solana Maximal Extractable Value (MEV) bot has earned $1.8 million by backrunning an unfortunate trader who attempted to purchase $9 million worth of Dogwifhat (WIF) meme-coin through a low liquidity AMM pool. As the incident unfolded, the trader acquired the token at an inflated average price of $3, significantly above its previous trading value of approximately $0.2.

Solscan reveals that the MEV bot converted 703.1 SOL, equivalent to $66,000, into 490,143 WIF tokens. It subsequently sold these tokens on Raydium, accruing 19,035 SOL, or $1.8 million in a single transaction.

The bot’s strategy involved backrunning the buyer who was attempting to buy 86k SOL worth of WIF. At the time of the buyer’s purchase, liquidity was scarce across multiple automated market maker (AMM) exchanges: only 11k SOL was available on Raydium AMM, 19k SOL on Orca, and 60k SOL on Meteora. Large transactions on AMM exchanges that exceed the pool’s liquidity can result in substantial slippage, presenting a lucrative opportunity for MEV bots to exploit.

However, it is crucial to understand that in this particular case, the bot did not exploit the buyer. Among the various MEV strategies, backrunning is generally perceived as the least harmful. The strategy involves the bot capitalizing on the arbitrage opportunity created by the price impact of the initial transaction. The buyer, with their substantial order, inadvertently caused a disturbance in the pool, leading to the inflated price of WIF. The bot acted after the buyer had purchased their WIF tokens, and arbitraged the price back to normal levels.

The bot utilized a tool developed by Jito Labs, akin to Flashbots on the Ethereum network. This tool allows Solana validators to garner additional profits by incorporating MEV bundles into their transaction sets. In this process, searchers (bots) submit MEV bundles containing transactions in a specified order to validators, offering a premium for their inclusion. Validators receive multiple bundles with varied orderings, but the highest bidder typically secures the inclusion of their bundle in the block.

In this case, the bot invested 890 SOL ($84,550) to incentivize the validator to prioritize its bundle. While the fee may seem steep, it pales in comparison to the $1.8 million profit made in less than 20 seconds.

Interestingly, some believe that the large purchase by the buyer was not just a fat-fingered mistake, but perhaps done for a hidden reason. Considering the buyer’s trade size, it seems unlikely that they didn’t understand the basic rules of DEX trading or missed the high slippage warning.