⌜Introduction⌝

At the end of 2024, Jito Labs, supported by the Jito Foundation, launched the development of the Block Assembly Marketplace (BAM). As Jito Labs CEO Lucas Bruder explained, the initiative addresses a critical need: bringing greater determinism and transparency to the ordering of transactions within a single slot.

⌜What’s Jito⌝

[Jito Labs]

Jito Labs is a core Solana development team focused on improving transaction execution and managing Maximal Extractable Value (MEV) transparently. They developed the Jito-Solana client, an enhanced validator client with advanced MEV features like bundle aggregation and revenue sharing.

Jito Labs also developed the Block Engine, which enables searchers to submit optimized transaction bundles. Jito Labs is the technical team building the infrastructure and tools around MEV on Solana.

[Jito Foundation]

The Jito Foundation is a non-profit organization that supports the Jito ecosystem and the broader development of MEV solutions on Solana. It acts as the community governance body and funding arm, ensuring that MEV capture and redistribution remain transparent, fair, and decentralized.

The foundation is partly governed through the $JTO token, which allows holders to participate in proposals and decision-making for the future of the ecosystem. In essence, the Jito Foundation is the governance and community-driven entity that steers the long-term growth of Jito’s innovations.

⌜Solana Blockchain⌝

[Problem]

In Solana’s current blockchain, transaction sequencing has suffered from a lack of clarity and fairness. Leader validators could freely reorder transactions without enforced rules or proofs of intent. Only the finalized block was visible, with no record of which transactions had been reordered or dropped.

As a result, traders and liquidators were exposed to frontrunning and backrunning, practices that fuel harmful sandwich attacks. This degraded execution quality and led to unfavorable prices.

Note: For a deeper explanation of sandwich attacks on Solana, check out our dedicated article on the topic.

[Solution by Jito Labs]

The Block Assembly Marketplace (BAM) redefines Solana’s market structure. According to a press release shared with CoinDesk, it is designed to make transaction sequencing “transparent and verifiable.”

BAM also creates new revenue streams for developers and reduces the impact of harmful MEV. BAM introduces three major innovations:

• Verifiable fairness: sequencing that is fully traceable and auditable.

• Programmable blockspace: developers can create custom sequencing rules.

• New revenue streams: applications can implement personalized fee models, benefiting developers, validators, and stakers alike.

  

⌜Technical Architecture⌝

[BAM Validators]

These are the validators running the updated Jito-Solana client. Their role is to execute the transactions delivered by BAM Nodes in the defined order.

[BAM Nodes]

It is a network of scheduler nodes using Trusted Execution Environments (TEEs). These secure enclaves sequence transactions while ensuring confidentiality and verifiability. TEEs function like “black boxes”: they rank and simulate transaction bundles without revealing sensitive data. This protects traders’ private strategies while still allowing validators to verify the results.

[Plugins]

Plugins are programmable interfaces that allow developers, traders, and applications to define their own sequencing logic. They introduce a new economic model:

• Developers can monetize their custom logic.

• Validators, node operators, and stakers share the value generated through a built-in redistribution system.

  

BAM thus transforms blockspace into an open sandbox, enabling the design of modular applications and new market models. For example, CLOBs (Central Limit Order Books) can be implemented within BAM, with deterministic and transparent execution that combines both on-chain and off-chain logic.

Subscribe now

⌜BAM and MEV impact⌝

Maximal Extractable Value (MEV) is at the core of BAM’s design.

• Reducing harmful MEV: BAM mitigates frontrunning, sandwich trading, and liquidation backruns, which previously undermined user trust.

• Encouraging useful MEV: arbitrage, which improves market efficiency, becomes more seamless and transparent.

Ensuring fair access: BAM offers a programmable and open path to capture MEV, without validator collusion or private agreements.

[Sandwich]

Before BAM

• Based on mempool visibility and validator reordering.

• Attackers front-run and back-run user trades.

• Users pay worse prices, value extracted by sandwichers.

After BAM

• Transactions are encrypted → no visibility for opportunistic attacks.

• Verifiable order → no hidden reordering.

• Only transparent logic via plugins is allowed.

➡️ Toxic MEV sandwiches is “neutralized”.

[Liquidation]

Before BAM

• Speed races between bots → massive spam and wasted resources.

• Gas wars raise costs for everyone.

• Unfair ordering possible, depending on validator behavior.

After BAM

• Encrypted tx → no mempool leaks, liquidations triggered purely from on-chain state.

• Verifiable order → bots can’t be unfairly pushed back.

• Protocols can design liquidation plugins (e.g. best discount, priority rules).

➡️ Liquidations remain, but become cleaner, fairer, cheaper, and protocol-driven.

[Arbitrage]

Before BAM

• Arbitrage bots rely on speed and spam to capture price gaps.

• Occasional unfair reordering could distort outcomes.

• High competition wastes compute units.

After BAM

• Encrypted transactions prevent sniping opportunities.

• Verifiable order ensures fair sequencing of arbitrage trades.

• Plugins can support new forms of cross-DEX or JIT arbitrage in a transparent way.

➡️ Arbitrage survives, but evolves into smarter, transparent, and more efficient strategies.

⌜Perspectives of Solana with BAM⌝

BAM brings Solana closer to a model where validators no longer order transactions themselves but instead select the most relevant pre-built blocks. This opens new opportunities for the ecosystem but also creates greater reliance on a smaller set of builders — making transparency and fair access absolutely essential.

For Solana, which aspires to become the financial ledger of the internet (or, as the community often calls it, the “Solana capital market”), BAM represents a strategic advancement. By allowing applications to define their own fee models, it transforms sequencing into a direct source of profit. If these revenues are redistributed to token holders, it could trigger a massive revaluation of many assets and drive a profound reshaping of Solana’s DeFi landscape.

⌜Final Summary⌝

The launch of BAM marks a major milestone in Solana’s evolution. With more transparent execution, programmable blockspace, and a new revenue-sharing model, the ecosystem is entering a phase of maturity.

As Lucas Bruder, CEO of Jito Labs, summarized:

BAM does more than simply address past inefficiencies; it redefines the foundations of decentralized finance on Solana and paves the way for a fairer, more innovative, and more sustainable blockspace economy.

🙏 Thank you for reading and for your support. If you find our work valuable,

🔂 Share it and follow us to stay updated with the latest insights and analysis.

🌐 Explore solutions on our website Circular.fi .

🔗 Join our community on Discord, follow us on X @Circular.fi, and Telegram .

👋 See you soon for more updates!

⌜Introduction⌝

Slippage is a key concept in decentralized trading, especially on Solana, a blockchain known for its high speed and highly competitive environment. It refers to the difference between the expected price of a transaction and the actual price at which it is executed.

Example:
→ You want to buy a token at $1.00
→ You end up paying $1.02
→ Slippage = 2%

❌ Without slippage tolerance: the transaction fails
✅ With slippage tolerance (ex 2%): the transaction goes through, but at a slightly higher cost

While often minimal, slippage can become a significant risk if not properly managed particularly in a high-speed, competitive DeFi environment like Solana's.

⌜Importance of slippage on Solana⌝

Slippage is necessary because prices on a DEX fluctuate in real time. It allows:

[Trades to be executed despite market volatility]

• The price can change between the moment you sign the transaction and when it is confirmed on-chain.

• Without slippage tolerance, transactions would fail too frequently.

[Let users choose their preferred level of risk]

• Low slippage = more security, but higher risk of transaction failure

• High slippage = guaranteed execution, but potentially worse pricing

[Prevent “optimistic” errors]

• You set an acceptable margin of error (e.g. 0.5%).

• The protocol won’t execute the swap if the actual price exceeds that margin.

[Low liquidity pools]

• With low-liquidity tokens or newly launched liquidity pools, a large transaction can significantly impact the price

• High slippage, potential loss.

[Protection against losses]

• Slippage is your safety belt. It limits how much you're willing to lose due to market movement, not because of the token itself.

⌜Maximal Extractable Value⌝

Check out our full article on MEV

[Arbitrage]

Arbitrage bots serve a regulatory function.
By adjusting prices across multiple liquidity pools, they narrow quote spreads and reduce slippage for subsequent trades. Their presence is structural: by exploiting imbalances, they enhance market efficiency and contribute to price alignment.

[Sandwich]

By leveraging private mempools, some bots insert transactions before and after a targeted trade (frontrun + backrun), artificially inflating the user’s cost. While this strategy represents a small share of total MEV profit, it increases slippage for profit and directly degrades the user experience.

⌜Slippage & Account ⌝

On Solana, data is passed through accounts. As a result, each transaction includes:

• Instructions

• And the accounts associated with those instructions

So the information “I want at least 4.95 SOL” is stored in a field (or an associated account) of the transaction. These values are encoded in the transaction it self not just in the web app’s frontend.

• Allowed slippage = what you're willing to tolerate (min_out)

• Observed slippage = what you actually got (difference between estimated and actual price)

⚠️ Risk ⚠️
If slippage were set only in the frontend (user interface), then:

• A bot could intercept the transaction

• And execute your swap at a bad price

Encoding min_out_amount inside the transaction ensures the swap only executes if the minimum is met.
➡️ The program will refuse to execute the swap if this minimum isn’t met.
So you’re protected directly on-chain.

You want to swap 100 USDC → you expect to receive 5.00 SOL
You set a 1% slippage tolerance → meaning 4.95 SOL minimum

In the transaction:
Jupiter or Raydium encodes min_out = 4.95

If the market moves and the swap gives you 4.92 → ❌ the program cancels the execution

If you receive 4.96 → ✅ the swap is accepted

⌜Private transaction⌝

It is not a Solana on-chain program, system instruction, or native protocol. Here’s exactly what it is, what it isn’t, and how it fits into the ecosystem:

• An off-chain infrastructure service designed to protect user transactions from MEV attacks, such as sandwich strategies.

• Operated by entities like Circular.fi, it relies on a network of compatible validators similar to FAST relayers.

• It acts as a private relayer or "private transaction tunnel."

Some API (e.g. FAST) offer a private transaction option that routes trades directly to a partner validator, bypassing standard propagation paths like public RPCs or broadcast networks.
The goal is to prevent bots especially those using validator-integrated setups from seeing or front-running the transaction before execution.

In the Fast documentation example, this command allows you to execute a transaction, either protected or unprotected against MEV attacks.

frontRunningProtection: false, 

⌜New Paradigms: Slippage-Free DEXs⌝

Toward slippage-free DeFi on Solana?

Slippage is currently a core element of decentralized trading, but several experimental projects on Solana are aiming to eliminate it entirely by rethinking how exchanges operate. Two stand out for their innovative approach: Soliquid and Gavel.

Still in the prototype phase, these projects rely on complex systems combining virtual order books with atomic matching.
Trade intents remain private until execution.
This discreet execution model is drawing the attention of the MEV research collective on Solana.

Although not yet widely adopted, these projects reflect a deeper trend in DeFi,
aiming to eliminate slippage not through user settings, but by designing a new generation of DEXs where slippage is no longer managed it’s structurally removed.

These experiments are still in early stages, but they raise important questions about the future of decentralized trading:

1. Will slippage remain a fundamental parameter ?

2. Or will it be absorbed by fairer but more complex protocol designs?

⌜Data Analytics⌝

What Slippage Reveals About DeFi Markets on Solana

In a fast and fragmented environment like Solana, slippage isn’t just a side effect of trading.
For a tool like Circular.fi, it can surface on-chain insights such as:

• A key factor in arbitrage analysis (was the trade still profitable after slippage?)

• A metric for DEX swap efficiency

• A signal of MEV bot activity

⌜Final Summary⌝

• Slippage is both a user risk, a MEV opportunity, and a sign of inefficiency in Solana-based DEXs.

• It can be analyzed with high precision, block-by-block, transaction by transaction to detect stress points or potential attacks.

• Defensive strategies include strict min_out settings, private transactions, and smart tipping.

• New models are emerging to eliminate slippage by design, such as Gavel and Soliquid.

• At Circular.fi, slippage is viewed as a behavioral, tactical, and strategic signal, valuable across all levels: user, trader, arbitrageur, and builder.

🙏 Thank you for reading and for your support. If you find our work valuable,

🔂 Share it and follow us to stay updated with the latest insights and analysis.

🌐 Explore solutions on our website Circular.fi .

🔗 Join our community on Discord, follow us on X @Circular.fi, and Telegram .

👋 See you soon for more updates!

⌜MEV on Solana: The 3 Dominant Strategies⌝

On Solana, arbitrage isn’t just about spotting price gaps between two DEXs. Thanks to ultra-fast execution and low transaction fees, the network enables highly advanced arbitrage strategies used daily by MEV bots.

⌜What is MEV Mechanism⌝

MEV (Maximal Extractable Value), refers to the set of techniques used to extract additional value by reordering, inserting, or censoring transactions within a block.
On Solana, MEV mechanisms leverage fast execution, private mempool access, and infrastructure like Jito or Firedancer to strategically prioritize or manipulate transactions.
Typical strategies include:

• Arbitrage

• Liquidations

• Sandwich attacks

Often executed by bots, these operations highlight both the technical efficiency of Solana and the ongoing challenges around fairness and transparency in on-chain markets.

⌜🔄Arbitrage⌝

Concept: Exploiting price inefficiencies for identical assets across Solana DEXs (e.g., Orca, Phoenix, Raydium, Lifinity) through atomic execution

Execution Flow:

• Continuous on-chain monitoring of price feeds across liquidity pools.

• When a price discrepancy is found, the bot buys the token where it’s cheaper and sells it where it’s priced higher.

• Execution is near-instant, typically via atomic swaps (CPI calls), optimized multi-hop routing (Jupiter), or their own custom trading programs.

Example :

Trading Pair: SOL/USDC
DEX 1: Raydium Price: $167.00 (Liquidity: 500 SOL)
DEX 2: Phoenix Price: $168.41 (Liquidity: 200 SOL)

Opportunity:
Buy: 200 SOL on Raydium $167.00 → Cost: $33,400
Sell: 200 SOL on Phoenix $168.41 → Revenue: $33,682

Gross Profit: 
$282 ($1.41 per SOL spread)

Last month, arbitrage bots executed approximately 1.2 billion transactions on Solana.

⌜📉 Liquidation⌝

Concept: On lending protocols like MarginFi, Drift, or Solend, when a loan breaches its collateral ratio, a liquidator can repay part of the loan and claim the collateral with a bonus.

How it works:

• Bots monitor at-risk accounts across lending platforms via protocol APIs or Geyser streams.

• Once a loan’s collateral ratio drops below threshold, the bot triggers liquidation.

• It repays a portion of the debt and receives a larger amount in collateral → net profit.

Example :

A user on MarginFi takes out a loan in $USDC backed by $SOL.
→ Loan: 1,000 USDC (Collateral: 10 SOL @ $160) Liquidation: 85% LTV

The value of $SOL drops, pushing the position below the liquidation threshold.
→ Price Drop: SOL → $150 (LTV now 90%)

A liquidator repays $500 USDC and receives $540 worth of $SOL.
→ Repays 500 USDC (50% of debt) → Receives 3.6 SOL ($540 at $150/SOL)
→ Profit: $40 (8% bonus) + gas covered

Liquidators processed $28M in Solana liquidations (Marginfi/Drift/Jito, in 2024 ).

⌜🥪 Sandwich Attacks (Front-Back Running)⌝

Concept: Inserting transactions around a victim’s swap to exploit price slippage, profiting from the induced market movement and capture the slippage.

How it works:

1. Detection: Bots monitor private mempools for large pending swaps.

2. Front-Run: It front-runs by buying SOL first, before the victim’s trade executes.

3. Victim Impact: The victim’s swap artificially inflates the price due to low liquidity.

4. Back-Run: The bot selling the SOL at the new higher price, capturing the slippage as profit.

5. → Profit = price difference induced by the user's trade.

Example :

Target Trade: 
A large inbound swap is detected on Orca 10K $SOL → $USDC 
(initial price: $162.50).

Bot Action:
Front-run: Buys 500 SOL @ $162.50 → $81,250
Victim’s impact: trade executes → Price spikes to $163.30
Back-run: Sells 500 SOL @ $163.30 → $81,650

Profit: 
→ The bot back-runs to capture the slippage and extract profit, $400 (0.5% of victim’s trade size) 

According to tracking data, sandwich attacks extracted approximately 16M SOL from Solana over the past 30 days

⌜Final Summary⌝

Solana hosts a rapidly evolving MEV ecosystem. Understanding these three core mechanism methods provides crucial insight into how value flows on-chain and helps builders, traders, and curious minds stay competitive in a decentralized financial future.
On Solana, MEV is live-action every block.
It’s no longer just about capturing a spread. It’s about understanding how the network’s architecture enables extraction. These three strategies arbitrage, liquidations, and sandwich attacks form the core of what bots relentlessly harvest, block after block.

As Solana evolves with Jito, staking-based bundles, and dynamic fee markets, the nature of MEV will shift.

🙏 Thank you for reading and for your support. If you find our work valuable,

🔂 Share it and follow us to stay updated with the latest insights and analysis.

🌐 Explore solutions on our website Circular.fi

🔗 Join our community on Discord, follow us on X @Circular.fi, and Telegram

👋 See you soon for more updates!

⌜HISTORY OF ARBITRAGE⌝

The 17th century marked a significant shift in the world of arbitrage, Amsterdam emerging as the global financial hub.

The Dutch East India Company became the first publicly traded company in the world, with shares being traded in major cities like Amsterdam, London, and Paris.
The Bank of Amsterdam (1609) created a more stable currency system but traders still found ways to profit from foreign exchange (forex arbitrage).

They Spices, gold, and tulips were traded between continents, creating huge arbitrage opportunities.

⌜DEFINE ARBITRAGE⌝

Arbitrage is a trading strategy where you make a profit by buying an asset at a lower price in one place and selling it at a higher price in another place. The difference between these two prices is your profit.

Example of Simple Arbitrage:
Let’s say you go to two different stores:

→ Buy an apple for $3 on Shop A
→ Sell this apple for $5 on Shop B

If you do this you can win $2 by apple

⌜HOW ARBITRAGE WORKS IN CRYPTO⌝

In cryptocurrency, prices of the same coin or token can vary between different exchanges (financial markets). This creates an opportunity to buy low on one platform and sell high on another.

Example in Crypto Arbitrage:

→ 1 SOL costs $150 on Exchange A
→ 1 SOL costs $151 on Exchange B

Buy Solana on Exchange A and sell it on Exchange B, making a $1 profit per SOL.

⌜Why Does Arbitrage Exist?⌝

Arbitrage plays a crucial role in the blockchain ecosystem by balancing prices across different networks and trading platforms. Arbitrage traders help correct price discrepancies between exchanges, ensuring market stability.

These traders take advantage of price differences by buying an actif at a lower price on one platform and selling it at its actual market value elsewhere. This process helps realign prices and keeps DeFi protocols and trading platforms in sync with the broader market. Without arbitrage, price imbalances could last longer, leading to inefficiencies and potential losses for users.

⌜TYPES OF ARBITRAGE IN CRYPTO⌝

1️⃣ Centralized exchange

– Buying from one exchange and selling on another (CEX)

→ Binance → Kraken

2️⃣ Decentralized exchange (Atomic arbitrage)

– Finding price differences between decentralized exchanges (DEX)

→ Uniswap, Meteora, Raydium, Orca ...

It’s theoretically risk-free since everything happens in a single transaction, but it requires a bot and ultra-fast execution!

3️⃣ Multidirectional Arbitrage

• Exploiting price differences between different trading pairs on the différents exchange (CEX & DEX).

• Involves a single asset traded across multiple platforms to exploit price variations.

→ Buy SOL on a DEX like 150$    ->  and sell it immediately  
→ Sell SOL on CEX like 152$

⌜Transaction Analysis⌝

This transaction is quite interesting! ⏩️ Here’s what happened ⏪️:

DEX Swaps Only – The transaction was executed across three liquidity pools: Raydium CLMM 🔁 Meteora DLMM 🔁 Raydium CP.

1️⃣ Starting Balance - The wallet began with 11.1 SOL and swapped it for 2,231 USDC.
2️⃣ USDC to LIBRA – The 2,231 USDC was then used to purchase 1,795 LIBRA.
3️⃣ Final Swap – The 1,795 LIBRA was exchanged for a massive 3,044 SOL!

📉 ‼️ High Fees Alert ‼️– This transaction incurred 0.48 SOL ($92,19) in fees, which is quite high for Solana blockchain.

Overall, this was a well-executed arbitrage move,
turning 11.1 SOL into 3,044 SOL through strategic swaps!

⌜ ⚠️ Risks of Arbitrage ⚠️⌝

- Fees – Trading, withdrawal, and deposit fees can eat up profits.
- Network Delays – Moving funds between exchanges can take time, and prices may change.
- Slippage – Crucial feature on Solana that safeguards traders against sudden price changes. It plays a key role in DeFi swaps and arbitrage by helping to mitigate the risk of losing funds from large price disparities.

🙏 Thank you for reading and support. If you find our work valuable,

🔂 Share it and follow us to stay updated with the latest insights and analysis.

🌐 Explore solutions on our website Circular.fi

🔗 Join our community on Discord, follow us on X @Circular.fi, and Telegram

👋 See you soon for more updates!