Hasu⚡️🤖 Profile picture
Jun 7 13 tweets 5 min read
As MEV is becoming even more important in PoS Ethereum, Flashbots is about to release mev-boost, a neutral middleware that allows any builder to openly compete in making the best blocks. This is great for validators, staking pools, and Ethereum itself.
Block production consists of (1) building the best block from all available transactions, and (2) proposing this block to the network. The increasing difficulty of block building due to MEV is a centralizing force in Ethereum and the solution is to separate the two roles cleanly.
This technique is called proposer-builder-separation and is rolled out to Ethereum in three stages:
mev-boost, which can be seen as Stage 2 PBS, is good for many reasons.

An open market between builders maximizes revenue for validators.

But mev-boost will especially help solo validators, who were too small to participate in Stage 1 PBS.
Going from a 1-to-many builder world can also increase Ethereum's censorship resistance.

Finally, we expect some builders to compete on features like account abstraction, privacy, paying MEV back to users, and more!
But I think the most underrated aspect of mev-boost is that it is completely neutral infrastructure.

While not everyone was agreeing with Flashbots' mev-auction approach, builders in mev-boost can use any ordering approach they want, and we expect users to vote with their feet.
Unlike Stage 1 PBS where all participating miners had to run mev-geth, mev-boost will also work with any client. This supports Ethereum's goal of increased client diversity.
In terms of security, mev-boost is designed from the ground up for maximum security and redundancy. This matters to Ethereum but also to participating validators.
While the goal is to move to Stage 3 PBS, there are good reasons to move ahead with an out-of-protocol solution for now.

mev-boost is an important interim step that allows us to gather data and iterate toward the winning design before enshrining it in Ethereum itself.
A final benefit is that mev-boost addresses a problem that all staking pools like Lido, Rocketpool, Alluvial, etc., have: their node operators are incentivized to hide the true value of blocks from the user!

mev-boost is an oracle for how much blocks are actually worth.
Lastly, there are risks we need to stay vigilant of.

While Stage 3 PBS will solve the need for mutually trusted relays, builder centralization can be a bigger issue in the future. mev-boost is taking an important step by making competition between builders as easy as possible.
This article is written by me and @thegostep, my first for Flashbots. Expect more frequent writing going forward 🙂
Check out the full article: writings.flashbots.net/writings/why-r…

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More from @hasufl

May 15
After seeing the discussion yesterday, I want to add some even more high-level thoughts on stETH/ETH exchange rate dynamics

thx @rleshner and @koeppelmann for sparking this follow up thread
stETH has some negative carry (as discussed below) but importantly it has positive carry as well!

the positive carry is the yield that stETH accrues compared to ETH.

for example, after one year, 1 stETH will be 1.07 stETH whereas 1 ETH is still 1 ETH.
the market/investor sentiment determines whether the NET carry of stETH vs ETH is positive or negative.

when it‘s positive, more people want to create stETH from ETH (start staking)

when it‘s negative, more people want to redeem stETH for ETH (unstake)
Read 8 tweets
May 14
In the last week, the stETH/ETH exchange rate has slightly declined in secondary markets

here‘s some thoughts on why they traded at pair to begin with and why the current events are both natural and healthy
1. stETH trading at a discount to ETH is the natural state of this market.

why? stETH has what we‘d call „negative carry“ in the form of

less liquidity, optionality; and
more governance risk, sc risk, eth2 execution risk

(I personally consider these risks pretty mild)
2. when markets and volatile and trending down, investors start to value liquidity and optionality more, so giving them up becomes more expensive

as a result, the natural discount increases
Read 6 tweets
May 12
stETH is trading at 0.98 ETH rn, what does that mean?

💭First, what actually is stETH?

1 stETH is a claim on 1 staked ETH on the Ethereum Beacon chain.

You can redeem it after withdrawals from the BC are enabled, which is planned for EOY 2022.

This is the primary stETH market.
💭Who is unaffected by stETH secondary market price? (hint: almost everyone)

So, stETH is a claim on 1 ETH in the primary market, but these claims can be traded as well.

These are the secondary stETH markets.

(btw, that's why we call stETH a staking "derivative")
Read 9 tweets
May 10
Binance book is empty. Never seen that before
It's not for a lack of demand to bid below $.70. It's simply not possible to submit orders via frontend/API. Dunno what's going on
More importantly, it's physically impossible to sell $UST on Binance below $0.70
They literally set a price floor
Manipulation much lol
Read 4 tweets
Apr 14
While Lido is opening a new chapter towards full decentralization, we're opening another new chapter together:

🏝️ I'm excited to announce that I am joining Lido as Strategic Advisor.
Decentralization at the consensus layer is the source of many assurances we value about public blockchains.

I have made it my personal mission to keep it that way and keep public blockchains decentralized.

This inspires my work with Flashbots⚡️🤖, and now Lido 🏝️ as well.
One year ago, I published my initial research into staking pools and derivatives with @gakonst.

After doing the research, I became convinced that the market for staking will trend toward one winner.
Read 6 tweets
Apr 8
What Twitter avatar should I use? (see below)
Read 4 tweets

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