Compilation of the original text: Deep Tide TechFlow

Compilation of the original text: Deep Tide TechFlow

So far, MEV talk has focused almost exclusively on Ethereum. However, this article will explore MEV in the Solana and Cosmos ecosystems. This article will highlight various approaches to addressing MEV and related incentive alignment challenges, including a comparative analysis of trade-offs. By scaling up, we can learn from various practices in operation to better anticipate potential problems and ultimately design better solutions.

ETH

On Ethereum, the rise of financial applications served as a catalyst for broader research and understanding around MEV. The seminal Flashboys 2.0 paper published in 2019 not only created"MEV "This phrase, but also clarifies the specific manifestation of this phenomenon on the chain. This is the first time most of us are exposed to concepts like Priority Gas Auctions (PGAs) or searchers. Shortly thereafter, Flashbots was formed to address many of the incentive alignment challenges associated with MEV. They initially proposed three core goals to strive towards:

• light up the dark forest

• Democratizing Value Extraction

• distribution of benefits

Since then, both of their major product launches have achieved over 90% network adoption, and it's fair to say that these goals have also evolved into guiding principles that have largely influenced the development of the Ethereum blockspace market.

The core product of Flashbots

• Flashbots auction (mev-geth + mev-relay) creates a private transaction pool and off-chain sealed bid auction. This allows seekers to express finer grained preferences for tx ordering in bundles, and bids for inclusion at the top of blocks, without clogging Ethereum's public mempool with failed arbitrage attempts and causing gas fees to escalate severely.

• Flashbots Protect is an RPC endpoint that can be added to consumer wallets such as MetaMask. This extends the benefits of the product to the average user.

• MEV-Boost is designed in anticipation of the Ethereum Merge, as MEV is expected to become an increasingly centralized force in proof-of-stake. It is the first implementation of the Proposer-Builder Separation (PBS), which aims to separate the role of the Block Builder from that of the Block Proposer by creating a more decentralized and competitive market for block building. separate.

• MEV-Share (unpublished) outlines the design of a protocol that matches transactions from users, wallets, and/or applications with searchers in a private and permissionless manner. Decentralized access to order flow and the introduction of the concept of programmable privacy are key long-term goals of the protocol.

• SUAVE (unreleased) is an upcoming release that aims to address (1) exclusive order flow and (2) remaining centralization weight of cross-domain MEV. Details on this project are scarce, but it appears that SUAVE will serve as a decentralized memory pool and ordering layer for the EVM ecosystem. It will employ encrypted mempools and introduce a new player to the MEV supply chain: Executors - who will compete to provide users with the best execution.

Solana

Like Ethereum, Solana’s growth in financial activity attracted MEV activity, which began to degrade the end-user experience. However, unlike Ethereum, where gas fees become prohibitively expensive, Solana’s problems are caused by a combination of the following factors:

(1) Very low gas cost.

(2) Lack of fee market.

(3) The lack of a sub-optimal transaction propagation protocol does not provide many options in preventing web spam.

During periods of wild market volatility or popular on-chain events such as NFT Mint, the volume of spam transactions sent to the network is sometimes so large that it causes network outages.

Some might wonder why the Flashbots product suite can't simply be repurposed for Solana. But it's important to consider that Solana's architectural design is very different from Ethereum's, and thus requires a unique approach. The main differences include, for example, Solana's speed (block interval 400 milliseconds), unique data dissemination protocol, mempool-less transaction forwarding, native fee market, and parallel transaction processing.

In 2022, Jito Labs steps in to give it much-needed MEV infrastructure with an approach specific to the Solana ecosystem. Like Flashbots, they started with a few key goals in mind:

• Minimize negative externalities of MEV

• prevent centralization

• Distribution of rewards for MEV

Jito Labs' core products

Since then, Jito has been the dominant MEV solution provider on Solana and has released many products including:

• Jito-Solana is the first third-party Solana client optimized for efficient MEV extraction. Much like mev-geth, it supports transaction aggregation and works seamlessly with Jito Relayer and Jito Block Engine.

• Relayers are designed to provide a layer of protection for validators between their TPUs (Transaction Processing Units) and web spam. Validators can run their own Relayer or use a version hosted by Jito Labs.

• The Block Engine is essentially a high-performance block builder - it conducts a sealed-bid auction for block space and forwards the most profitable collection of transactions to the current leader for immediate execution. Block Engine is also globally distributed to provide low-latency open access.

Searcher Tools:

• Jito Mempool -- Although Solana doesn't have a mempool in the traditional sense, it allows searchers to subscribe"interested account", and use bundles to automatically extract MEV from their transactions, allowing for a more proactive search approach.

• ShredStream - Running on the Jito-Solana client, it sends shards directly to locally connected block engines and allows seekers to access shards forwarded by the leader, reducing latency by hundreds of milliseconds. (Shards are fragments of a block (the smallest unit), which are continuously emitted when the validator generates a block. They are distributed to the network according to the shuffling method of pledge weight, so servers with higher weight may be more receive shards quickly, which can lead to meaningful advantages when engaging in high-frequency trading).

• MEV payout and distribution enables validators to seamlessly distribute MEV rewards to their staked positions in the form of airdrops.

Chorus One, one of the largest node operators in all major cryptocurrency ecosystems, also recently published a white paper outlining a prototype of Solana-MEV. This is a modified client designed to further enable validator fetching in a decentralized manner without adding unnecessary latency to the system. This client will make it easy for validators to check for potential MEV opportunities after each batch of user transactions and insert their own transactions to capture value.

Cosmos

Although Cosmos can be said to have the most rudimentary DeFi ecosystem, it is expected to become a fertile ground for block space market design and cross-domain MEV experiments.

Unlike Ethereum, which already has billions in transaction and lending volume, and Solana, which is dominated by low-latency financial applications, Cosmos seems to be moving slowly on MEV.

There are many possible reasons for this, but the most obvious explanations are the default use of first-in-first-out (FIFO) ordering by the Tendermint client, and a lack of financial activity.

It wasn't until the release of Osmosis in late 2021, and even the collapse of Terra in May 2022, that people began to notice and measure meaningful quantities of MEV captured in the Cosmos ecosystem. Combine these events with bear market conditions like plummeting fees, and it’s easy to see why validators are starting to consider other options in an attempt to remain profitable.

As a result, some Cosmos-native MEV solution providers started to enter the space, most notably Skip Protocol and Mekatek.

Mekatek's core products

• Zenith aims to create an open market for block building in Cosmos. Seekers can submit bundles of transactions and compete for priority within blocks, while validators can outsource block construction to Zenith and sell their block space for maximum profit.

Skip Protocol's core product

• Mev-Tendermint is a modified version of Tendermint that allows validators to accept bundles of transactions and introduces sealed bid auctions for inclusion at the top of blocks (Skip does not build entire blocks, only the top).

• Skip-Select brings Cosmic sovereignty to MEV by allowing fully configurable, governance-driven blockspace auctions. It allows validators to easily decide how to distribute MEV rewards, what percentage of the construction of a given block should be outsourced to Skip, whether to protect blocks from front-running/sandwiching, etc. Skip-Select also lays the foundation for future voting and enforcement of in-protocol MEV preferences via on-chain governance, which is enabled by the Cosmos SDK and ABCI++ (Application Blockchain Interface).

• Skip Secure is very similar to Flashbots Protect - a private transaction RPC that end users and frontends can leverage for private execution.

• Proto-Rev is arguably Skip's most exciting product yet - a custom module to incorporate certain MEV preferences into the core protocol. The first implementation of Proto-rev is to help Osmosis capture some meaningful arbitrage-based MEV rewards internally, but the service will be available on a per-chain basis.

While less public information about the project has been made public, FairBlock is building an IBE-based solution (Identity-Based Encryption) to address MEV-related challenges. The team plans to use Cosmos Hub's Interchain Security for their consumer chain, which will be used to manage and distribute validator decryption keys.

key point

• The success of PBS - the concept of block builder separation (PBS) has spread beyond the Ethereum ecosystem, and some versions of it now exist in the Cosmos and Solana ecosystems;

• Latency Wars - Due to Solana network architecture issues, Jito Labs has taken a latency-sensitive approach to MEV extraction, which gives advantages to users running servers or validators outside of the US or Europe;

• Enshrined Solutions - Due to the level of sovereignty and autonomy the Cosmos community has over its technology stack, it is often easier to embed MEV solutions such as PBS into the core protocol. There are many reasons for this, including that while Cosmos governance is often challenging, it can be done on-chain without regard to how changes will affect other applications. And on the technical side, innovations such as the latest version of ABCI++ allow for new possibilities in how Cosmos-based applications communicate directly with the consensus layer, allowing features such as threshold encryption;

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