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Solana’s congestion issues spilling over to other chains, here’s how

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Solana has been dealing with issues on its network for quite some time. Now, a recent report by Bloomberg is claiming that similar issues might be spilling over to other chains on the Ethereum ecosystem. And, it largely has to do with bots attempting to make trading profits.

Bots clogging the network?

The report explains that it is done on the back of strategies like “sandwich trading” and front-running by these bots. And, as a result, millions of dollars have been made in trading profits over the years.

Just earlier in January, Solana had identified that its mainnet beta was experiencing high levels of network congestion due to the same issue. During which, users experienced delays and failure in transactions on top exchanges.

Soon after, the network went on to adopt 1.8.14 to mitigate the issue.

Solend, a protocol built on Solana, had explained that the weak prices in the market had caused many accounts to become liquidatable and created many profitable arbitrage opportunities. Further adding,

“Since opportunities were so profitable and failed transactions so cheap, bots were incentivized to spam the network with many duplicate transactions in the hope that one of them lands.”

Similarly, back in September, Solana experienced performance degradation by bot activity that pulled it offline for 17 hours.

Bots targeting cheaper alternatives

The report also notes that Flashbots or bot softwares estimates that over 25% MEV or the maximum value that can be extracted from block production, takes place outside Ethereum. Essentially making Polygon, Avalanche, and Binance Smart Chain other attractive options for these automatic trades.

Avi Felman, a portfolio manager at BlockTower told Bloomberg,

“Outages on a decentralized blockchain are always concerning. Solana’s recent troubles should remind everyone that new consensus mechanisms are inherently untested, and are very much still as experimental as they are exciting.”

However, on the contrary, the only good thing that has come out of the bot activity is building efficiency. It can be argued that bots have quickly removed any arbitrage opportunities, bringing down price discrepancies.

Despite the recent downtime issues, Solana Labs has announced a new point-of-sale (POS) product on Solana Pay. The instantaneous payment method will allow advancement in both crypto and commerce as per the protocol. It noted,

“The core premise behind Solana Pay is that the payment and underlying technology goes from being a necessary service utility to true peer-to-peer communication channel between the merchant and consumer.”

As Solana launches the next “era” of payments, it is to be seen if the recent upgrade can effectively solve the ongoing issues on the chain.

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Shraddha is a full-time journalist at AMBCrypto. She has a keen interest in personal finance and wealth generation. Her primary focus is on the cryptocurrency space's applications for investment vehicles and portfolios

Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.