Looking at the road to decentralization of MEV from FlashBots

MEV (Miner / Maximum Extractable Value) refers to the potential value that miners or verifiers can obtain in blockchain transactions, and is the profit generated by the transaction sequence and packaging selection method. The sources of MEV include Front Running, Back Running, sandwich attack, etc. For more information on the concept of MEV, please read "**Analysis of the Development Status and Trends of MEV"****. **

Flashbots has launched a series of solutions on MEV, and is committed to establishing a fair, transparent, and secure trading environment. This article will take stock of Flashbots' efforts to decentralize MEV.

Flashbots Auction - Miner Decentralization

In the PoW era, the main participants of MEV include searchers and miners. Miners have mining rights and have privileges in transaction ordering, queue jumping and tampering, thus occupying the bulk of profits. At the same time, searchers are willing to pay high Gas fees to ensure that their transactions are included in the block. In some cases, searchers may take out 90% or more of MEV as rewards to miners.

Obviously, this privileged position poses a threat to the privacy and security of transactions, and brings negative externalities including network congestion and Gas competition. **

Flashbots Auction provides a private communication channel between Ethereum users and miners to negotiate the execution order and price of transactions in a transparent and fair manner.

• **Submit auction: **The searcher packages the transaction into Bundles and submits it to the Flashbots auction system, and specifies a minimum price to show the potential value of the transaction;
• **Miner bidding: ** Miners bid on the Bundle they are interested in in the auction system, specifying the lowest price they are willing to accept;
• **Construction block: **The miner selects one or more Bundles with the highest bid from the auction system and includes them in the block;
• Settlement and Execution: The transactions and bundles contained in the block will be executed in the order and price reached in the auction.

**Through Flashbots Auction, searchers no longer need to use Gas War to ensure that their transactions are packaged first, and do not need to pay for failed transactions, which makes MEV distribution more fair and reasonable, and greatly improves the security and security of the Ethereum network. effectiveness. **

MEV-Boost - Validator Decentralization

In the PoS era, PoW miners are replaced by verifiers (you can become a verifier by staking 32 ETH on the beacon chain and running the Ethereum client). In each Epoch, a verifier will be randomly selected as the proposer to package the transaction and submit it to the Ethereum Fangzhu.com.

Flashbots Auction launched MEV-Boost, introducing a new role - Builder, responsible for building blocks. Separation of proposers and builders through PBS (Proposer-Builder Separation) promotes validator competition, decentralization and anti-censorship. At the same time, verifiers are connected to MEV-Boost, reducing the threshold for finding the most profitable transactions, which can greatly increase the pledge income.

Image credit: Flashbots

Searchers look for transactions with arbitrage opportunities through channels such as mempool, package them with their own transactions into bundles, and send them to block builders;

Builders try to pick the most profitable bundles to pack into blocks and send them to Relay;

Relay actually hosts the block packaged by the builder for the verifier. The relay forwards the block header to MEV-Boost. After the verifier signs the block header to lock the promise of the packaged block, the relay forwards the complete block to the verifier;

Validators sign commitments to become block proposers, responsible for proposing blocks to the network and adding blocks to the chain.

Suave - Builder Decentralization

**Although MEV-Boost brings various benefits, it also faces the problem of centralization of builders. Currently, a small number of builders monopolize most of the block construction. **

There are two main reasons for the centralization of builders:

• EOF (Exclusive Order Flow), for example, builders establish cooperation with wallets, Dapps, etc., and obtain exclusive order flows by modifying the user's default RPC;
• Cross-domain MEV, cross-domain builders capture multi-chain transactions, leading to more centralization of the entire blockchain network.

To this end, Flashbots launched Suave, a highly specialized plug-and-play independent network that separates mempool and builders from existing chains, and multiple chains share the same ordering layer to ensure decentralization.

Image credit: Flashbots

Suave's architecture revolves around user transaction preferences, which are the expression, execution and settlement of preferences.

**General preference expression: **In Suave's mempool, the transactions of all EVM chain users are displayed openly and transparently. Users can express their trading preferences when initiating a transaction;

**Best execution market: **The executor monitors the transactions in the mempool, fully competes to propose the best execution price, and the executor will return part of MEV to the user;

**Decentralized block construction: **Beyond the single block builder, form a decentralized block construction network, share order flow and Bundles between the networks, and collaborate without revealing the specific content of the transaction Complete block construction; since builders can package MEV generated by multiple chains, this also enables builders and verifiers to obtain higher MEV income.

Relay decentralization

At present, in the MEV-Boost ecosystem, the problem of Relay centralization has not been fully resolved, and Relay plays a trusted role in the entire MEV chain. As one of the largest relay operators in the market, Flashbots provides free use to validators, which leads to a lack of incentive for new relay operators to enter the market. At present, the high concentration of Relays may cause problems such as single point of failure and transaction review. Some Relays will collude with Builders, give priority to forwarding blocks of cooperative Builders, and refuse or delay the processing of certain normal transactions, thereby affecting full competition in the market.

If top Relay operators such as Falshbots continue to provide subsidies, it will be difficult for Relay to form a market size to promote decentralization.

It is worth noting that Flashbots is not currently the largest Relay provider. Ultra Sound is an optimistic relay that is permissionless, neutral and censorship resistant. We're excited to see the increased diversity of Relays, and of course Flashbots is providing open source support for new Relays like Ultra Sound and Agnostic Gnosis.

The Relay of Bloxroute, which IOBC has invested in, is also connected to Flashbots and forwards transactions to MEV-Boost. The Bloxroute BDN network has relays distributed around the world, so the success rate and speed of using Bloxroute relays will be higher. In 2022, Bloxroute will cooperate with the Flashbots white hat team to allow Flashbots customers on the BNB Chain to use the BloXroute BDN to achieve a fast and reliable transaction experience.

Image source: mevboost.pic

**Where will the MEV "volume"? **

Mempool: Profitable orders are the starting point of MEV. These entrepreneurs are mainly rolling BD, looking for more wallets, Dapps, etc. to access their own RPC to protect transaction privacy and obtain exclusive order flow. Some projects will also return part of the MEV revenue to users through the protocol level, such as Flashbots' MEV-share.

Builder: These entrepreneurs mainly focus on hardware and strategies. Safe and stable service provision is the basic factor for a builder to be selected, and strategies directly affect MEV profits; some entrepreneurs are also eyeing cross-domain MEVs After all, the value of MEV that can be extracted by a single chain is limited.

Validator: The threshold for validators is constantly lowering, becoming one of the best ways for retail investors to participate in MEV. For Validator entrepreneurs, they mainly pledge the liquidity of ETH, which is the LSDfi track. Currently, the LSDfi track is also relatively crowded. .

The future development of MEV still faces some challenges:

**1. Cross-domain MEV. **With the development of Layer 2, more and more transactions flow from Layer 1 to Layer 2, but Rollup's block generation and sorting are handled by Sequencer, and MEV is exclusively extracted by Sequencer, becoming one of Rollup's important sources of profit. The emergence of shared sorters may solve this problem.

**2. MEV profit redistribution. **At present, most of MEV is extracted by verifiers, and the unfair interests of all parties will lead to a stronger willingness to do malicious things.

Although the head effect of the MEV track is obvious, it still continues to attract more developers into the dark forest. In fact, there are still many areas worthy of in-depth discussion on MEV, such as the capture of MEV in the modular blockchain, the impact of re-pledging on the MEV supply chain, etc., and we look forward to better solutions.