The "Invisible Tax" on Solana

Written by: SpecialistXBT

Earlier this year, an article titled “Payment for Order Flow on Solana” uncovered a dark corner of the Solana fee market, sparking phenomenon-level attention on English Twitter.

PFOF (Payment for Order Flow) has long been a mature business model in traditional finance. Robinhood used this model to launch the “zero-commission trading” bombshell, quickly breaking through among many established brokerages. This strategy not only made Robinhood immensely profitable but also forced industry giants like Charles Schwab and E-Trade to imitate, changing the landscape of retail brokerage in the US.

In 2021 alone, Robinhood raked in nearly $1 billion in revenue from PFOF, accounting for half of its total revenue that year; even by 2025, its quarterly PFOF income remained in the hundreds of millions of dollars. This demonstrates the enormous profit behind this business model.

In traditional markets, market makers are extremely fond of retail orders. The reason is simple: retail orders are generally considered “toxic-free,” often driven by emotion or immediate needs, and do not contain precise predictions of future price movements. Market makers profit from the bid-ask spread when taking these orders, without worrying about becoming counterparties to informed traders (such as institutional big players).

Based on this demand, brokerages (like Robinhood) bundle user order flows and sell them in bulk to market maker giants like Citadel, earning hefty kickbacks.

Regulation in traditional financial markets somewhat protects retail investors. The SEC’s “Regulation of the National Market System” mandates that even packaged orders must be executed at prices no worse than the best market prices.

However, in the unregulated on-chain world, applications leverage information asymmetry to induce users to pay far above actual on-chain demand for priority fees and tips, quietly intercepting these premiums. Essentially, this acts as an “invisible tax” on unsuspecting users, generating enormous profits.

Flow Monetization

For applications that control large user entry points, flow monetization methods are far more diverse than you might imagine.

Frontend apps and wallets can decide where users’ transactions go, how they are executed, and even how quickly they are confirmed on-chain. Every “gate” in a transaction’s lifecycle hides business opportunities to “consume” user value.

Selling User Access to Market Makers

Just like Robinhood, applications on Solana can sell “access rights” to market makers.

RFQ (Request for Quote) is a direct manifestation of this logic. Unlike traditional AMMs, RFQ allows users (or applications) to directly inquire and transact with specific market makers. On Solana, aggregators like Jupiter have integrated this model (JupiterZ). In this system, the application can charge connection fees from these market makers or directly bundle and sell bulk retail order flows. As on-chain spreads narrow, the author expects this “headhunting” business to become increasingly common.

Moreover, DEXs and aggregators are forming some kind of mutual benefit alliance. Prop AMMs (proprietary market makers) and DEXs rely heavily on traffic from aggregators, which can charge these liquidity providers and return part of the profits as “rebates” to frontend applications.

For example, when Phantom wallet routes user transactions through Jupiter, the underlying liquidity providers (like HumidiFi or Meteora) might pay Jupiter to secure execution rights for these trades. Jupiter then returns a portion of this “channel fee” to Phantom.

Although this speculation has not been publicly confirmed, the author believes that driven by profit motives, this internal “profit-sharing rule” within the industry chain is almost a natural phenomenon.

Vampire Market Orders

When users click “Confirm” and sign in their wallets, this transaction is essentially a “market order” with a slippage parameter.

For applications, there are two ways to handle this order:

Benign route: Sell the “Backrun” (tailing arbitrage) opportunity generated by the transaction to professional trading firms, sharing the profits. Backrun refers to when a user’s buy order on DEX1 pushes up the token price there, and arbitrage bots follow closely within the same block to buy on DEX2 (without affecting the user’s buy price on DEX1), then sell on DEX1.

Malicious route: Assist sandwich (triangular arbitrage) attackers in attacking their own users, pushing up the transaction price.

Even the benign route does not mean the application has a conscience; to maximize the value of “tailing arbitrage,” there is motivation to deliberately slow down transaction confirmation. Driven by profit, applications may also route users to less liquid pools to artificially create larger price swings and arbitrage opportunities.

Reports indicate that some well-known frontends on Solana are engaging in these behaviors.

Who Took Your Tips?

If the above methods still require some technical threshold, then the dark manipulation of “transaction fees” is basically “no need to act.”

On Solana, user-paid fees are actually divided into two parts:

• Priority Fee: An internal protocol fee paid directly to validators.

• Transaction Tip: A SOL transferred to any address, usually paid to “landing service providers” like Jito. These providers then decide how much to share with validators and how much to rebate back to applications.

Why are landing service providers needed? Because during network congestion, communication becomes extremely complex, and ordinary transaction broadcasting can easily fail. Landing service providers act as “VIP channels,” using optimized pathways to promise transaction success and on-chain confirmation.

The complex builder market and fragmented routing system on Solana have created this special role, offering excellent rent-seeking opportunities for applications. Applications often induce users to pay high tips to “guarantee” success, then share this premium income with landing service providers.

Transaction Flow and Fee Landscape

Let’s look at some data. During the week from December 1 to 8, 2025, the entire Solana network processed 450 million transactions.

Among them, Jito’s landing services handled 80 million transactions, dominating the market (93.5% of the builder market share). Most of these transactions involved swaps, oracle updates, and market maker operations.

Within this massive traffic pool, users often pay high fees for “speed.” But are these fees truly used for acceleration?

Not entirely. Data shows that low-activity wallets (usually retail users) pay exorbitant priority fees. Considering that the blocks at that time were not full, these users were clearly overcharged.

Applications exploit users’ fear of “transaction failure,” inducing them to set extremely high tips, then sharing this premium income through agreements with landing service providers.

Negative Example: Axiom

To illustrate this “harvesting” model more intuitively, the author conducted an in-depth case study of Axiom, a top application on Solana.

Axiom’s transaction fees dominate the network, not only because it has many users but also because it is the most aggressive in fee extraction.

Data shows that the median priority fee (p50) paid by Axiom users is as high as 1,005,000 lamports. In comparison, high-frequency trading wallets pay only about 5,000 to 6,000 lamports. That’s a 200-fold difference.

Similarly, tips paid by Axiom users on landing services like Nozomi and Zero Slot far exceed the market average. The application exploits users’ extreme sensitivity to “speed,” completing double charges without any negative feedback.

The author candidly speculates: “Most of the transaction fees paid by Axiom users ultimately go into the pockets of the Axiom team.”

Regaining Fee Pricing Power

The severe misalignment between user incentives and application incentives is the root cause of the current chaos. Users do not know what constitutes reasonable fees, and applications are happy to maintain this chaos.

To break this deadlock, we need to start from the underlying market structure. The introduction of Solana’s proposed Multi-Concurrent Proposers (MCP), Priority Ordering mechanisms, and the widely proposed dynamic base fee mechanism before 2026 may be the key to solving these issues.

Multiple Concurrent Proposers (MCP)

The current single-proposer model on Solana tends to create temporary monopolies. Applications only need to deal with the current leader to control transaction bundling in the short term. Introducing MCP allows multiple proposers to operate concurrently each slot, significantly increasing the cost of attacks and monopolies, enhancing censorship resistance, and making it harder for applications to control nodes to block users.

Priority Ordering

By protocol enforcement of “sorting by highest priority fee,” the randomness (jitter) in ordering is eliminated. This reduces the need for users to rely on private acceleration channels like Jito just to “guarantee” success. For regular transactions, users no longer need to guess how much tip to give; paying within the protocol ensures that all validators process based on deterministic rules.

Dynamic Base Fee

This is the most critical step. Solana is attempting to introduce a concept similar to Ethereum’s dynamic base fee.

Users are no longer blindly tipping but explicitly instructing the protocol: “I am willing to pay up to X lamports for this transaction to be on-chain.”

The protocol automatically prices based on current congestion. If not congested, it charges a low fee; if congested, it charges a higher fee. This mechanism takes the pricing power of fees away from applications and middlemen, returning it to a transparent protocol algorithm.

Meme has brought prosperity to Solana but also planted the seeds of its flaws, leaving behind a restless profit-seeking gene. For Solana to truly realize the vision of ICM, it cannot allow frontend traffic applications and infrastructure protocols to collude and act arbitrarily.

As the saying goes, “Clean the house before inviting guests.” Only by upgrading the underlying technical architecture, using technology to eliminate rent-seeking soil, and developing a fair, transparent market structure that prioritizes user welfare can Solana truly have the confidence to compete and integrate with traditional financial systems.