Anika Begay
Over the past year or so, since cryptocurrency prices began to bounce back strongly in late Q3 2024, interest has increased, drawing attention to low-cost, scalable alternatives to Ethereum. These blockchains, primarily Solana, allow users to deploy smart contracts at low cost, all while remaining trustless and, to some extent, reliable.
Bot Activity Isn’t All That Bad: Here’s Why
However, while Solana and some Ethereum layer-2 platforms have attracted users, they are also a hive of bot activity. Solana’s near-zero fees explain the spike in bot activity, both beneficial and harmful, that has attracted analysts’ attention.
Related Reading: Market Expert Says Ethereum Scalability Progress Is Unstoppable, Here’s Why
While the prevalence of these bots can be seen as detrimental to organic on-chain activity, one user on X thinks are integral and help in the growth of the broader ecosystem. The analyst argues that the community misunderstands the role of bots, with most dismissing them as “spam” and “not real” while maintaining their activity, should be excluded from economic calculations.
The user now argues that this position is misguided. From the analyst’s perspective, all on-chain bots are essential, especially in creating liquidity and ensuring efficient market operations. If nothing else, useful bots help stabilize the ecosystem.
On public chains like Solana, the analyst continued, these bots should not be considered a nuisance but a feature since, regardless, all on-chain activity must incur a fee, which these bots, like organic users, pay. Their activity and the fee paid, in turn, increases the overall health of the network.
By way of comparison, the analyst also added that bot activity in traditional finance represents approximately 60% to 70% of trading volume. Although they have different names, including “algos” or “quants,” their role is crucial. They are seen as sophisticated tools that institutional players use to trade efficiently.
Therefore, this should not change in cryptocurrency and blockchain. If anything, the analyst added, on-chain bots should be viewed similarly to “algos” in traditional finance and considered a “feature,” not a bug to be demonized. Without bots, on-chain activity would struggle with low liquidity and unacceptable market inefficiency, significantly impacting user experience.
The threat of MEV bots, the Solana Foundation intervenes
Despite this argument, the discussion about bots remains in the gray area. While some bots contribute positively to the ecosystem, others can detract from the user experience and harm the long-term success of the blockchain.
The emergence of Maximal Extractable Value (MEV) bots, especially on low-cost platforms like Solana, remains a concern. These bots aim to exploit inefficiencies and extract maximum profit from traders, thereby eroding trust.
While these MEV bots add liquidity, like other useful bots, they do so not for the good of the ecosystem, but at the expense of much-needed trading equity.
There have been interventions as MEV bots plague major blockchains, including Solana and Ethereum. The Solana Foundation recently banned over 30 validators, claiming they facilitated MEV bots on the platform.
Feature image from Canva, chart from TradingView
