MEVpool, the best MEV patch we have

The value that miners can extract. This formulation is actually one of the most significant fundamental risks that exist for blockchain-based systems. The original idea of blockchain included incentives for miners (or other consensus participants that determine the order of transactions) to earn income based on any underlying block subsidy introduced into circulation by each block, in addition to the fees that users pay to confirm their transactions.

Nowadays, these two aspects are no longer the only sources of income that motivate miners to act. More complex contracts and protocols have emerged that make it easier to create and exchange various assets hosted on the blockchain. These contracts provide open access for everyone. If you have the required asset and can meet the conditions of the exchange, any user can interact with the contract or protocol to exchange assets unilaterally.

Given that miners ultimately decide which transactions are included in blocks, this gives them an advantage in accessing “cross-the-line” when interacting with such contracts and protocols. This creates significant challenges, depending on the level of difficulty involved in successfully extracting value from various contracts or protocols.

This creates significant centralization pressure in mining, especially as contracts and protocols become more complex. Miners can collect all this value, but to do so, they actually need to analyze the current state of these contracts. The more complex the contract, the more labor-intensive and expensive it becomes to analyze, which in turn increases centralization pressure for miners.

This has a negative impact on resistance to censorship.

Separation of the Proposer and the Builder

Ethereum is a prime example of MEV gone wrong. Due to the high complexity of the contracts deployed on Ethereum, the volume of MEV created was quite significant. Of course, there have been attempts to solve this problem.

The Proposer Builder Separation sought to mitigate the risks of MEV centralization by creating a distinction between the two roles involved in the blockchain’s progress. Builders (block template creators) are responsible for actually assembling transactions into blocks, while Proposers (miners/stakers) select the most profitable block templates from the available ones. The basic idea is to allow centralization to influence template producers, but to protect miners/stakers from this influence. As long as there is a competitive market for template production, everything should be safe.

However, in practice, this has not happened. The reality is that there are only a few competitive Builders, and when the most profitable template producers decide to censor something, it is effectively censored by every miner/staker who chooses to use those profitable block templates. Given that it is not economically feasible not to choose the most profitable template, this does not really eliminate the risk of censorship.

MEVpool

The idea behind MEVpool by Matt Corallo and 7d5x9 is an attempt to adapt the PBS proposal to Bitcoin in a way that actually reduces the risk of censorship.

The main difference between PBS and MEVpool is that the outsourcing of template construction is not complete; in MEVpool, miners still ultimately create the final block template. They merely delegate the process of selecting a subset of transactions that optimize MEV extraction, including those found in the block templates they create. This is intended to allow miners to maximize their share of MEV while retaining the freedom to include any transactions they wish, as opposed to the binary choice between accepting censorship to maximize profits or foregoing profits to prevent censorship in PBS.

The proposal calls for setting up market relays to host order books where MEV extractors can post their proposed transactions and the fees they are willing to pay miners for including them in a block. They will allow the extractor to determine the conditions under which it will reward the completion of a transaction, such as if they are the first transaction to interact with a certain contract in a block. The marketplaces will also support both sealed and unsealed orders, where sealed requests are orders where the proposed transaction remains hidden from the miner until they mine a block.

How does it work? All miners need is a transaction hash to add to the Merkle tree to start mining; they don’t need the full transaction until they find a valid block and start broadcasting it. However, they do need to verify that the transaction is valid. This is the job of market relayers.

There are two ways they can do this. First, the easiest way is to become a fully trusted third party. MEV extractors will relay their transactions to relay operators that miners will connect to. They will then ask the marketplace operator for a list of sealed and unsealed orders, including the hashes needed to include the sealed orders, and have the custom software create a block template. Once they successfully find a valid block header, they will send the block minus the missing data to the relay.

The relay will then enable full sealed transactions, broadcast the block itself, and then send the full sealed transactions to the miner so that it can broadcast the block as well.

Source: cryptonews.net