GMGN How to trade small classroom: Gas, priority fee, Slippage, MEV

When conducting on-chain transactions, many basic concepts may determine the success or failure of your trades. Now, trading tools strive to lower the threshold for everyone's operations, and most people lack understanding of on-chain parameters. This article aims to help you gain some insights. The article is based on a technical article written by Haze, the co-founder of gmgn, and compiled, translated, and written by Foresight News. (Background: Unusual Solana MEV! GMGN Founder: Be cautious of trading Slippage, recommend reducing the amount for each transaction) Some basic concepts: Gas Fee (GAS) Gas = Transaction fee on the blockchain Payment to Miners / validators to process your transactions High Gas → Transactions are prioritized for packaging Low Gas → Might get stuck in the queue Payment methods: SOL transaction → Pay SOL ETH transaction → Pay ETH Different chains have different Gas mechanisms Slippage Slippage = Deviation between expected price and actual execution price Causes of Slippage: Insufficient market Depth → Large order size, but insufficient Liquidity in the pool Trading latency → Price Fluctuation from submission to execution MEV sandwich attack → Bots manipulate prices for Arbitrage Example: You use 1000 USDC to purchase ETH, expecting a price of 2000 USDC/ETH, which should give you 0.5 ETH. However, the execution price becomes 2050 USDC/ETH, and you ultimately receive only 0.4878 ETH, resulting in a Slippage of 2.5%. If you set the Slippage at 0.1%, the transaction would fail directly due to insufficient Slippage. MEV sandwich attack How does it work? Front-run → Bots buy before you, driving up the price Your transaction execution → You can only trade at a higher price, incurring Slippage losses Back-run → Bots immediately perform Arbitrage Impact: Purchase price is inflated, Transaction Cost rises Bots increase your Slippage for Arbitrage, causing you to buy expensive and sell cheap Solana vs ETH sandwich: ETH → Precise sandwiching SOL → MEV bots batch submit orders, widely sandwiching How to prevent sandwiching? Enable MEV protection to reduce the risk of being monitored Priority Fee, also known as a bribe Priority Fee = Extra fee paid to Miners / validators to speed up transactions Components: Base Fee → Network's basic fee (Solana is fixed, ETH is dynamic) Priority Fee → Additional fee you pay to increase transaction priority Purpose: Enhance transaction packaging priority for faster on-chain transactions In MEV competition, transactions with high Priority Fees will be executed first In conclusion, Gas fees of on-chain transactions + Slippage (including the Slippage range you set and the impact of your purchase amount on the pool) + MEV sandwich collectively determine the final Transaction Cost. Practical case: Many people speculate on meme tokens on Solana using 50% Slippage + MEV protection. Is this safe? Most meme tokens are traded on AMM You use 1000 USDC to buy a certain Token, with a 50% Slippage, allowing extreme price execution MEV bots buy first, driving up the price (within your Slippage tolerance) Your trade is executed at a high price, resulting in fewer Tokens purchased MEV bots immediately perform Arbitrage, profiting from your Slippage loss If MEV protection is effective: Transactions will not be precisely sandwiched (bots cannot front-run or back-run) If the pool's Liquidity is sufficient, the purchase amount will not impact the price, and the transaction will proceed normally If not effective: Solana does not have a private Mempool, MEV bots can still see your transactions and sandwich you If your amount impacts the pool: High Slippage = Allows extreme price changes, market Fluctuation may lead to losses Low Liquidity pool = Greater impact on trades, easily resulting in losses How to avoid sandwiching? Avoid using high Slippage, set Slippage range sensibly If using AMM, enable MEV protection to reduce the risk of being monitored High Slippage is crucial for successful meme token speculation? Most meme tokens do not have high short-term Fluctuation rates, and exceeding the Slippage range does not provide additional success rates. Instead, factors such as your Priority Fee, your transaction Node, and transaction routing to pools play a more significant role. Slippage is merely an option in extreme scenarios. Generally, a Slippage of 10% – 20% is sufficient for meme token speculation. This range can be manually adjusted multiple times during speculation to control risks. Conclusion: When trading on AMM platforms (Raydium), the Slippage parameter determines the likelihood of being sandwiched by MEV bots. If you set a high Slippage, you need to evaluate: Is the Gas fee high enough to prevent MEV bots from front-running? Is the purchase amount significant enough for MEV bots to profit from? Is the Liquidity pool deep enough to prevent exceeding the Slippage range? By conducting small trades in batches + reducing Slippage, you can significantly reduce the risk of being sandwiched and losses from small pools. How much Slippage? How to define small trades? This can only be felt through more speculation! Just like driving a manual car, practice makes perfect! Related reports: Technical》Learn on-chain analysis of the EVM: Using $COCORO as an example Sniper for new coins》Advanced tutorial on GMGN bots, making you a fast trader of meme coins Meme coin bubble》Pump.fun's volume drops by 95%, with only 2 Tokens exceeding a market cap of 1 million GMGN How to Trade Classroom: Gas, Priority Fee, Slippage, MEV This article was first published on BlockTempo by Dynamic Block, the most influential blockchain news media.