Just like driving, manual transmission relies on practice!
Author: Haze (@haze0x)
When trading on-chain, many basic concepts may determine your trading success or failure.
Now trading tools have tried to lower the operational threshold for everyone, and most people do not understand on-chain parameters. This article will help you understand a few.
Some basic concepts:
Gas Fee (GAS)
Gas = Transaction fee on the blockchain
Pay miners/validators to process your transaction
High Gas → Transaction prioritized for packaging
Low Gas → May get stuck in the queue
Payment methods:
SOL transaction → Pay with SOL
ETH transaction → Pay with ETH
Different chains have different Gas mechanisms
Slippage
Slippage = Deviation between expected price vs. actual transaction price
Causes of slippage:
Insufficient market depth → Large order volume, but pool liquidity is not enough
Transaction delay → Price fluctuations from submission to execution
MEV sandwich attack → Bots manipulate prices for arbitrage
Example:
You use 1000 USDC to buy ETH, expecting a transaction price of 2000 USDC/ETH, you should receive 0.5 ETH.
But the transaction price changes to 2050 USDC/ETH, you ultimately only get 0.4878 ETH, your slippage = 2.5%.
If you set your slippage to 0.1%, the transaction fails directly due to insufficient slippage.
How does a sandwich attack (MEV Sandwich Attack) sandwich you?
Principle of sandwich attacks:
Front-run → Bots buy in ahead of you, pushing up the price
Your transaction executes → You can only transact at a higher price, bearing slippage loss
Back-run → Bots immediately sell for arbitrage
Impact:
Your buying price is raised, increasing transaction costs
Bots arbitrage your slippage, making you buy high and sell low
Sandwiching on Solana vs. ETH:
ETH → Precise insertion of the sandwich
SOL → MEV bots submit orders in bulk, casting a wide net to sandwich people
How to avoid being sandwiched?
- Enable MEV protection to reduce the likelihood of your transaction being monitored
Priority Fee, also known as bribery
Priority Fee = A tip you give to miners/validators to execute your transaction faster
Components:
Base Fee → Basic network fee (Solana has a fixed fee, ETH has a dynamic fee)
Priority Fee → An additional tip you pay to increase transaction priority
Function:
Increases transaction packaging priority, allowing transactions to be added to the blockchain faster
In MEV competition, high priority fee transactions will be executed first
Summary
On-chain transaction costs are determined by Gas fees + slippage (including the slippage you set and the impact of your buying amount on the pool) + MEV sandwiching.
Practical case:
Many people are rushing to buy meme coins on Solana, using 50% slippage + MEV protection. Is this safe?
Most meme coins are AMM trades.
You use 1000 USDC to purchase a certain token, with 50% slippage, allowing extreme price transactions.
MEV bots buy in first, raising the price (within your slippage tolerance).
Your transaction executes at a high price, and you receive fewer tokens than expected.
MEV bots immediately sell for arbitrage, profiting from your slippage loss.
If MEV protection is effective:
The transaction will not be precisely sandwiched (bots cannot insert orders before and after).
If the pool liquidity is large enough, the buying amount will not impact the price, allowing the transaction to execute normally.
If it is not effective:
- Solana does not have a private Mempool, MEV bots can still see your transaction and sandwich you.
If your amount impacts the pool:
High slippage = Allows extreme price changes, market fluctuations may lead to losses.
Low liquidity pools = Greater impact from transactions, making it easier to get stuck.
How to avoid being sandwiched?
Do not use high slippage, set slippage ranges rationally.
If using AMM, enable MEV protection to reduce monitoring risks.
Is high slippage the key to success in buying meme coins?
Most meme coins do not have such high short-term volatility, and excessive slippage ranges do not provide additional success rates.
More importantly, your priority fee + your trading node + trading route selection, etc. These factors can continuously improve your trading success rate. Slippage is just an option in extreme cases. Most of the time, a slippage of 10% - 20% is sufficient. This part can be manually adjusted multiple times to control risk when buying meme coins.
For small traders, it’s all about small bets for big gains. The single purchase amount is not large, and adjusting the slippage can help avoid most sandwiching situations.
Conclusion
When the trading venue is AMM (Raydium), the slippage parameter determines your probability of being sandwiched by MEV.
If you set high slippage, you need to evaluate:
Whether the Gas fee is high enough to avoid being front-run by MEV bots.
Whether the buying amount is large enough to make it profitable for MEV bots.
Whether the liquidity pool is deep enough; otherwise, it may consume the entire slippage range.
- By trading in small batches + reducing slippage, you can greatly reduce the risk of being sandwiched and losses from small pools.
How much slippage? How to define small trades?
This can only be felt by trading more! Just like driving, manual transmission relies on practice!
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