Original Author: Sleeping in the Rain

Original Author: Sleeping in the Rain

Original editor: DavidMEV (Maximum Extractable Value) is one of the most important issues in the encryption world.

When MEV meets the fiery LSD wave, what kind of combination will the two have?

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MEV concept review

MEV is not a new product, it involves three stakeholder groups of blockchain users, verifiers and searchers.

Essentially, MEV has prompted all blockchain users to compete for the right to use block space. Therefore, at the moment when the chain is recovering, MEV has become a "cash machine" for many searchers. For example, under the Memecoin trend, as of April 19, the profit generated by MEV in seven days has exceeded 3 million US dollars.

A counter-intuitive phenomenon here is that the value of MEV is not captured by the validators of the blockchain, but by the searchers, who are often called "scientists" in Chinese crypto circles.

MEV can be simply understood as on-chain arbitrage in the form of front-running transactions. A common attack is a sandwich attack, commonly known as a clip robot.

For example, when you buy $10,000 token X on Uniswap, the robot smells the transaction, so it rushes to buy X with a higher fee before the block is packaged, and the robot's transaction is executed first.

The two trades generated by the robot happened to double-team our trade, which looked like a sandwich.

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MEV Protocols and PracticesIn order to regulate the unrestrained demands brought about by MEV,

A number of MEV-related protocols have also emerged in the encryption industry, such as Flashbots, CowSawp, Manifold Finance, etc.

• CowSwap and Flashbots basically represent two directions of MEV track application.

• CowSwap stands on the opposite side of MEV searchers. It uses the batch auction mechanism to adopt a uniform clearing price for all transactions in the same batch, so these transactions do not need to be sorted, and everyone receives the same asset price.

Flashbots gathers potential searchers to standardize management, builds a private mempool, provides ordinary users who use Flashbots RPC to avoid harmful MEV trading opportunities, and provides searchers with harmless MEV opportunities through Flashbots Bundle. And Flashbots MEV-Boost has established a channel that can help the protocol effectively communicate with verifiers, that is, verifiers can obtain additional rewards through MEV-Boost.

Flashbots' new product MEV-Share built on MEV-Boost aims to fair the depth of the MEV market, that is, to allow block space users and searchers to pay fees and extract value within the scope of the rules, and ultimately achieve fairness in transaction ordering change. The essence of MEV is a three-party game between the verifier (Builder), the searcher, and the block space user. The verifier can obtain economic incentives through its own power, and the searcher can obtain arbitrage fees, and the block space user seems to be only a fool.

The final result of MEV-Share is that under the premise of ensuring the transaction privacy of block space users, verifiers get their own work rewards, searchers get a small part of MEV rewards, and block space users get most of the MEV rewards, promoting Marketization, standardization, credibility, privacy and decentralization of MEV behavior.The implementation of MEV-Share will have a direct impact on block space users and validators, so the LSD block that brings together validators will also be directly affected. Different from LSDFi's matryoshka architecture, MEV is actually another direction of LSD expansion - it will also bring more real benefits to the LSD protocol.

The Manifold Finance we mentioned above is also an agreement that can bring additional MEV benefits to Ethereum pledgers. It creates a brand new asset, mevETH, and extends mevETH to the entire chain through LayerZero. mevETH will reward stakers by capturing non-predatory MEV yields. In addition, Manifold Finance has also established cooperation with many DeFi OG protocols such as SushiSwap to provide MEV protection for protocol users.

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Preliminary Study on the Impact of MEV on the LSD Track

Let's imagine how the LSD protocol will develop under the promotion of MEV-Share?

The fairness and marketization of MEV provides predictable benefits for the LSD protocol and Ethereum pledgers. Higher returns will promote the growth of Ethereum pledges and the adoption of LSD protocol for MEV-Boost or other MEV solutions.

In the future, the LSD protocol may use the form of native token governance to determine which MEV solution the protocol will use to obtain higher incentives. This is also the empowerment of the native token of the LSD protocol.The growth of Ethereum pledges will promote the growth of the market share of LSDFi track, and the rise of LSDFi will in turn promote the growth of the number of Ethereum pledges, thus forming a flywheel.

From another perspective, the fairness and marketization of MEV will promote the growth of activity on the chain. The rationalization of Gas fees and the maximum utilization of block space it facilitates are the secret weapons to improve the user experience on the chain. The demand for block space brought about by the increase in activity on the chain will promote the adoption of MEV products, and ultimately promote the user's demand for public chain security, that is, the demand for Ethereum pledge. This is also a flywheel.

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at lastI like the word "non-predatory" mentioned by Manifold Finance.Most of the current MEV protocols are designed to solve the problem of predatory MEV, and are committed to establishing a market-oriented and fair MEV market.