Solana has overtaken Ethereum on various metrics this week, but a recent research article on X claims that most of this activity is conducted by bots.
The article, published by pseudonymous researcher Flip Research on July 30, found a suspiciously high count of daily transactions per user on Solana.
Solana recorded an average of 217 transactions per user on July 26 across 1.3 million active addresses. In comparison, Ethereum only recorded less than three transactions per user across 376,300 active users.
“What’s clear is there’s a massive discrepancy, combined with a high amount of MEV and wash trading,” Flip Research told Cointelegraph.
According to Blockworks Research, Solana’s $25 million in total fees in the week of July 22 surpassed Ethereum’s total fees of $21 million. Solana also clocked the highest 30-day decentralized exchange (DEX) volume in the industry.
In the seven days to July 30, Raydium led Solana’s DEX trading volume with $6.078 billion. Orca and Phoenix trailed with $3.428 billion and $1.144 billion, respectively.
However, a big chunk of Solana’s transactions is believed to be driven by inorganic trading activities and bots, as suggested by Flip Research’s analysis of Raydium’s liquidity pools.
Countless liquidity pools on Raydium have little to no liquidity but generate unreal trading volumes. For example, the FLOG-SOL pool held just $3 in liquidity but had over $5 million in 24-hour trading volume.
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Flip Research’s analysis of these low liquidity pools suggests that they are rug-pulled projects, a common type of exit scam that has been rising in popularity among memecoin scammers.
One of the projects analyzed by Flip Research had $10.8 million of volume from $48 in liquidity, with 2,845 unique wallets wash trading the token to generate $28,000 in fees.
The wallets involved appear to be bots conducting thousands of transactions resulting in fake volumes before rug-pulling investors.
The researcher added that Raydium’s standard liquidity pools had over 50 rug projects that generated $200 million in trading volume and $500,000 in fees in 24 hours.
“[Solana] is the established ‘memecoin casino’, which is attracting volume from some least price sensitive and highest risk tolerance users,” Flip Research told Cointelegraph.
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“This leaves them open to exploitation from a number of actors, such as MEV bots, serial scammers, and insiders,” they said.
Solana’s bot volume has been around all year
Bots can operate at a restless pace that humans can’t, and their automated trades have been pumping volumes on Solana all year.
In February, the network’s monthly stablecoin volume surpassed $643 billion. Most of the stablecoin volume came from USD Coin (USDC) transactions on Phoenix, a Solana DEX.
Cointelegraph Magazine’s February analysis of blockchain transactions on Phoenix transactions found that the majority of the volume came from bots.
These automated traders have been a double-edged sword for Solana, as their activities have resulted in favorable metrics at the expense of the network’s health.
By April 2024, developers responded to congestion issued by releasing a mainnet update, though Flip Research’s findings suggest that bot activity is still rampant in the network.