1/ Your feed is probably filled with it and it seems like everyone can't talking about it.
But what the juice is MEV?
In this thread I explain:
- MEV
- Why gas fees are so high on $ETH
- Sandwich attacks
- Dark Forests
- Flashbots
- And how all this relates to $AVAX
But what the juice is MEV?
In this thread I explain:
- MEV
- Why gas fees are so high on $ETH
- Sandwich attacks
- Dark Forests
- Flashbots
- And how all this relates to $AVAX
2/ MEV stands for Miner Extractable Value.
On Eth, each tx has a fee and miners can choose which tx's to put in each block in whatever order they want.
MEV is the profit miners can make by including or re-ordering tx's into the block they mine.
On Eth, each tx has a fee and miners can choose which tx's to put in each block in whatever order they want.
MEV is the profit miners can make by including or re-ordering tx's into the block they mine.
3/ E.g, say there's a $10,000 arbitrage opportunity on Uniswap.
A bot submits a tx for it with a $10 gas fee to the miner.
One of two things may happen:
1. Miner executes the transaction themselves.
2. Other bots notice the tx and offer a higher gas fee to frontrun that tx.
A bot submits a tx for it with a $10 gas fee to the miner.
One of two things may happen:
1. Miner executes the transaction themselves.
2. Other bots notice the tx and offer a higher gas fee to frontrun that tx.
4/ Scenario 2 is the one most often played out.
And this causes gas bidding wars which result in network congestion and skyhigh gas fees.
If you've ever paid high gas fees on eth, this is why.
And this causes gas bidding wars which result in network congestion and skyhigh gas fees.
If you've ever paid high gas fees on eth, this is why.
5/ Because all pending tx's can be viewed in the public mempool, bots have been sniping large tx's with "sandwich attacks" for profit.
A sandwich attack is when you place a tx before and after the one u are targetting:
- Before Tx (frontrun)
- Targetted Tx
- After Tx (backrun)
A sandwich attack is when you place a tx before and after the one u are targetting:
- Before Tx (frontrun)
- Targetted Tx
- After Tx (backrun)
6/ In simple terms, you see that someone is buying a large amount of token.
So first you buy it to artificially inflate the price (frontrun).
And then sell it later to make profit (backrun).
This is the high frequency trading equivalent on the blockchain.
So first you buy it to artificially inflate the price (frontrun).
And then sell it later to make profit (backrun).
This is the high frequency trading equivalent on the blockchain.
7/ Previously it was thought that miners behaved altruistically.
But there has been increasing evidence that they have been selling direct access to traders, allowing them to bypass the mempool and frontrunners completely in a pay-to-play model.
But there has been increasing evidence that they have been selling direct access to traders, allowing them to bypass the mempool and frontrunners completely in a pay-to-play model.
8/ This has been coined the "Dark Forest" and it paints a reality that is far from the open, decentralized world we envisioned.
Luckily, many projects are addressing this issue.
Luckily, many projects are addressing this issue.
9/ Flashbots is a research project aimed to mitigate this problem.
It works by allowing users to "bundle" transactions off-chain with a "tip" to the miner.
It works by allowing users to "bundle" transactions off-chain with a "tip" to the miner.
10/ Each bundle is an ordering of tx's that you want executed. These can be your own and other users'.
The miner receives bundles and includes the one that has the highest tip.
The miner receives bundles and includes the one that has the highest tip.
11/ If your bundle is not chosen, then it is not included in the block.
And because this is all done off-chain, you don't lose money on gas.
And because this is all done off-chain, you don't lose money on gas.
12/ Since launching, flashbots has seen increasing adoption by both miners and traders.
In their March report, they reported that 12 mining pools accounting for almost 60% of hash rate was using flashbots.
In their March report, they reported that 12 mining pools accounting for almost 60% of hash rate was using flashbots.
13/ Increased adoption has lead to a reduction in MEV as you can see in the chart below on the left.
You may have also noticed gas prices are much lower recently too, such as today for example.
You may have also noticed gas prices are much lower recently too, such as today for example.
14/ Other projects that are aiming to solve this problem include:
- @Archer_DAO
- @MEVprotection
I won't cover them in this thread but implore you to check them out.
- @Archer_DAO
- @MEVprotection
I won't cover them in this thread but implore you to check them out.
15/ So how does this all relate to $AVAX?
For starters, finalization time is so quick it's almost physically impossible for bots to conduct sandwich attacks.
Secondly, Avalanche doesn't have any miners or designated block producers!
For starters, finalization time is so quick it's almost physically impossible for bots to conduct sandwich attacks.
Secondly, Avalanche doesn't have any miners or designated block producers!
16/ So the conclusion?
MEV does not exist on Avalanche.
We are #safu.
MEV does not exist on Avalanche.
We are #safu.
https://twitter.com/el33th4xor/status/1342514645358227459?s=20
17/ Cc'ing @el33th4xor, @jtrollip, @paradigm, @thegostep, @bertcmiller, @RektHQ to:
- Thank them for their work and insights
- Welcome any corrections in case I said stupid things
References:
- rekt.news/return-to-the-…
- research.paradigm.xyz/MEV
- explore.flashbots.net/data-metrics
- Thank them for their work and insights
- Welcome any corrections in case I said stupid things
References:
- rekt.news/return-to-the-…
- research.paradigm.xyz/MEV
- explore.flashbots.net/data-metrics
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