Thread by @Sky_ranker

Continue to our topic about Maximal Extractable Value (MEV), we would discuss deeper in #flashbots in this thread.

- What is MEV?
- What #flashbots trying to solve?
- MEV – Geth (PoW)
- MEV – Boost (PoS)
- Improved MEV-Boost (@project_shutter)

Let’s dive in 👇

https://twitter.com/Sky_ranker/status/1564208656115060736

MEV is a dynamic that allows miners to maximize their profit by determining the order of transactions on a blockchain network to their advantage. This includes arbitrarily reordering, including, or excluding transactions within a block at the expense of users.

1/12

After the Merge, rewards to miner will decrease, resulting in MEV will increase the percentage of profit for miner. Therefore, the MEV problem is getting important. Several solutions arose to mitigate these negative externalities. Most prominently, #Flashbots.

2/12

#Flashbots is trying to solve three aspects.

1. Quantifying the scale and volume of MEV extraction.
2. Democratizing access to MEV profits.
3. Reducing the impact of MEV-related transactions on regular users.

3/12

The original Flashbots product was mev-geth, a forked version of the geth client software used by mining nodes in building blocks, allowed miners to outsource the work of finding MEV opportunities and building the most profitable block to others, searchers and relayers.

4/12

Searchers - Find profitable transactions and send them to a miner for inclusion in a block, and instead of passing through the public mempool.

Relayers – Verify the trasnsaction bundles from searcher and sends them to the miner for inclusion in a block.

5/12

The miner running mev-geth uses software to evaluate all incoming bundles and chooses the bundles with the most profitable transaction ordering. Fortunately, Flashbots has also created a Post-Merge alternative called MEV-boost.

6/12

MEV-boost allows validators to auction off their blockspace to an open market and maximize their staking rewards, suggest that validator yields could increase an additional 60% due to MEV (assuming 8M staked ETH).

7/12

MEV-Boost separates the right of Builder, Relayer, Validator.

Builder – Knows the transaction content but cannot predict which transactions will be selected.

Relayer - Knows the transaction content & ordering result but has no right to execute.

8/12

Validator - Can ordering and execute transactions but has no idea of the transaction content until the result is confirmed.

And two benefits of MEV-Boost is “Protects Against Centralization” & “Helps Lower Gas Fees and Improves Security“

9/12

1. MEV-Boost Protects Against Centralization - Any validator, including individual stakers, have the MEV opportunities. Large staking pools cannot use their reputation as leverage to corner MEV deals.

10/12

2. MEV-Boost Helps Lower Gas Fees and Improves Security - DeFi traders will send "one-time" sealed price bids to miners instead of repeatedly sending transactions to the public mempool.

11/12

In the end, the distributed key generation of Shutter Network (@project_shutter) might make MEV – Boost better because of two reasons.

1. Relayer more decentralized.
2. Validator more trustless.

To be continued..

12/12