A value that can be extracted minor. That phrase is one of the biggest fundamental risk spaces that exist in essentially blockchain-based systems. The original concept of blockchain included an incentive for miners (or other consensus participants deciding on orders for transactions) to earn revenue based on all block grants that circulate each block, in addition to the fees users pay to confirm transactions.
These two things are no longer the only source of income that encourages miners to act. More complex contracts and protocols currently exist to facilitate the creation and exchange of different assets hosted on the blockchain. These contracts, by design, allow open access to anyone. If the assets are required and can meet the specified exchange terms, the user can unilaterally interact with the contract or protocol to exchange the assets.
Given that the miners ultimately decide which transactions are accepted by the block, this gives the miners priority access to “jump the line” in their interactions with such contracts and protocols. This presents serious problems depending on the degree of complexity involved in successfully extracting value from various contracts and protocols.
This creates significant concentration pressure on mining, making these contracts and protocols more complicated. The miner is ability To collect all this value, in order to do so, you actually need to analyze the current state of these contracts. The more complicated the contract, the more complex and expensive the analysis, and the more centralized pressures for miners.
This is horrifying for censorship resistance.
Separation of proposal builders
Ethereum is a child of MEV posters. Due to the high complexity of contracts deployed on Ethereum, the amount of MEVs created in that chain was very large. Naturally, they came up with solutions that were attempted according to the problem.
The separation of the proponent builder attempted to mitigate the risk of concentration in MEVs by separating the two roles involved in the advancement of the blockchain. The builder (block template creator) handles the role of actually assembling transactions into blocks, and the proposer (miner/staker) selects the block templates available to select the most profitable one. The idea behind the proposal is that centralization can affect template producers, but from there you can protect miners/stakers. As long as there is a competitive market for template production, things are still safe.
In reality, this has not happened. In reality, there are only a few competitive builders. If the most profitable template producer decides to censor something, it will be effectively censored by all miners/stakers who choose to use those profitable block templates. Given that not choosing the most profitable template is economically unreasonable, this does not really solve the risk of censorship.
Mevpool
The Mevpool proposal by Matt Corallo and 7D5x9 is an attempt to modify Bitcoin’s PBS proposal in a way that actually provides mitigation for the risk of censorship.
The main difference between PBS and Mevpool is that the outsourcing of the template structure is not perfect. At MevpoolMiners, we are ultimately building the end block template itself. They simply outsource the process of selecting a subset of transactions that optimize MEV extraction. This aims to allow miners to maximize MEV reductions while maintaining freedom to include the transactions they need, as opposed to the binary choice of accepting censorship for their best interests or making profits to prevent censorship under PBS.
This proposal requires that you set up a marketplace relay in a host order book where MEV extractors can post fees to pay the miners for inclusion in the proposed transaction and block. They allow the extractor to define the terms to which it pays for the conclusion of a transaction. That is, only if it is the first transaction interacting with a particular contract within a block. Marketplace also supports sealed or unsealed orders. That is, a sealed request is an order that has not been revealed until the proposed transaction actually minifies the block.
How does it work? All miners need is a hash of transactions to start mining into the Merkle Tree. No full transactions are required until you find a valid block and broadcast it. However, they need to know that the transaction is valid. This is the role that market relays must fill.
There are two ways they do this. First, the easiest way is to make them purely reliable third parties. The MEV extractor submits transactions to the relay operator, and the miner connects to these relays. They then request a list of sealed, unsealed bids from the market operator, including the hash needed to include sealed bids, and have them have custom software to build block templates. Once you have successfully found a valid block header, send the block minus the missing data to the relay.
The relay contains a fully sealed transaction, broadcasting the block itself, then sending a fully sealed transaction to the miner so that the block can be broadcast. Throughout this process, the charges for the MEV extractor are held in escrow by the market relay and released to the miners after finding a valid block.
This requires putting a lot of trust in the relay, not just on the miners’ side, but also on both the MEV extractors paying them.
The second option is to use a trusted execution environment (TEE) to handle building block templates on the minor side and handle encrypted sealed bids. Minor runs custom template software and Bitcoin nodes within the tee. After the miners receive a sealed, unsealed bid and construct the block, Tee signs the block proof and provides the session key to the Marketplace Relay.
The market encrypts sealed transactions and transactions that pay the session key to the miners. After the miners find a valid block hash that meets the difficulty target, TEE decrypts the sealed transaction and broadcasts the full block so that it can collect fees from the MEV extractor. In this scenario, everyone involved must trust the tee to stay safe.
Final Results
The end result of this is very likely, in my opinion, similar to Ethereum’s PBS. There are only a handful of large builders building MEV optimized templates for miners, all of which are sent directly to them directly from Mempool’s bands. In both variations, Mevpool Marketplace Relay is trusted to publish public fee information for submitted orders so that regular users can provide appropriate fee estimates. This could affect the entire user if a large market could attract transaction submissions that are not sent elsewhere and withhold that fee data.
It also allows miners the freedom to choose their own transactions outside of the MEV-optimized subgroup, but leaves room for a large marketplace where they receive private transaction submissions to take advantage of that position. Such a market can force miners to censor other transactions by withholding order data if their competitors do not have access to the same information.
Ultimately, I don’t see this as a solution to the MEV problem. This prevents or reduces the worst possible impact. It does not completely remove the risks and pressures of centralization, but improves them in certain areas.
This is a guest post by Shinobu. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
This post Mevpool first appeared in Bitcoin Magazine, the best bandaid you have in Mev, and is written by Shinobi.
