Solana: Beyond Speed, Pursuing Better Transactions

Solana, as a high-performance blockchain platform, has become renowned for its fast transaction speeds and large-scale transaction volumes. However, we need to consider a key question: do these transactions truly create value?

In fact, a large number of transactions on Solana do not originate from real trading demand, but rather from high-frequency arbitrageurs exploiting millisecond information gaps for profit. These so-called "toxic traders" use their technical advantages to prioritize their transactions by increasing Gas fees just as market makers are about to withdraw their orders, thus completing arbitrage and causing market makers to incur losses. To compensate for these losses, market makers are forced to widen the bid-ask spread, ultimately passing these additional costs onto ordinary users.

This phenomenon poses a challenge to Solana's vision of implementing an on-chain order book to replace centralized exchanges. Clearly, trading volume does not equate to liquidity. A truly healthy market requires not just more trades, but higher quality trades.

How to filter out toxic trades and protect liquidity?

In the current Solana system, due to the periodic auction nature of the consensus mechanism, the takers effectively enjoy priority, which leads to the impact of malicious MEV (Maximum Extractable Value) on market fairness. Specifically, Solana's consensus mechanism has a time slot every 400 milliseconds, where transactions are executed in order of the Gas fees paid within each slot.

Under this mechanism, market makers need to frequently adjust their quotes, while arbitrageurs can pay higher fees to execute trades ahead of the market makers' cancellations, leading to frequent losses for market makers. The ideal order of transactions should be: cancel orders first, then execute new orders, and finally execute trades. Similarly, for oracle pricing, prices should be updated first, and then trades dependent on that price should be executed.

BAM: Solana's New Solution

To address these challenges, Solana proposed the concept of a Block Assembly Marketplace (BAM). BAM builds a sorting layer or preprocessing layer between Solana applications and the mainnet. It utilizes Trusted Execution Environments (TEEs) to construct a privacy sandbox, where transactions are sorted according to preset rules or the first-in-first-out (FIFO) principle.

BAM supports three operating modes: Solana default mode, Block-Engine mode (similar to the current Jito MEV solution), and BAM mode (strictly FIFO ordering). The core of the BAM mode lies in utilizing TEEs to build a privacy environment for transaction ordering, and it allows applications to construct custom transaction ordering logic through a plugin system.

Practical Applications of BAM

1. Loan liquidation protection: prioritize the execution of additional collateral operations, followed by liquidation checks.
2. Atomic-level transaction combination: first update the oracle price, then execute the transactions that depend on that price, and for contract exchanges, related derivatives can also be settled simultaneously.
3. Price fluctuation protection: Detect abnormal large orders and execute in batches, giving the market time to react.
4. Market Maker Protection: In the event of an emergency, quickly cancel orders, update prices, and re-list orders to avoid being maliciously arbitraged.

The deployment of BAM will significantly improve the trading experience on Solana, bringing its mainnet applications closer to the experience level of centralized exchanges. It introduces verifiability, privacy protection, and programmability to Solana's trading processing flow, providing developers with the possibility to build more complex financial infrastructures, thereby driving innovation and development within the Solana ecosystem.