Stephane Gosselin, cofounder and chief architect of Flashbots, and Uri Klarman, CEO of bloXrouteLabs, joined Unchained to discuss everything about MEV, an especially important topic now with the Merge coming.

Show highlights:

what MEV is, how it works under Proof of Work
some examples of MEV, like frontrunning and arbitrage
how MEV is a rabbit hole full of monsters
the role of Flashbots in the MEV industry and how Flashbots enabled a reduction of gas fees for users
how MEV-geth functions and how it relates to auctions systems
how bloXroute, Uri’s company, is working with MEV
where Stephane and Uri disagree on MEV, despite agreeing on many fundamental things
how MEV changes with the implementation of Proof of Stake
what MEV-Boost is and the problems it solves
what proposer-builder separation is and the motivation behind this idea
whether DeFi would flourish more if there wasn’t frontrunning and why MEV-Boost doesn’t prevent it
what externalities MEV-Boost or proposer-builder separation (PBS) would solve for users
how MEV exists in other industries and in traditional finance
why Flashbots’ own investors would rather trade on a fair-sequenced rollup than on Flashbots
how the number of MEV extractors has been decreasing and whether this would end up centralizing MEV
whether exploiting certain types of MEV is illegal
how other chains are trying to solve frontrunning, like Osmosis with threshold encryption
what are the levers that can be pulled to solve MEV, according to Uri
how eradicating MEV can positively affect the price of ETH, and by how much
whether validators can potentially share MEV profits with users
how to determine if a network has a good MEV supply chain

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Show Links

Uri:

Twitter: https://twitter.com/uriklarman

Stephane:

Twitter: https://twitter.com/thegostep

Previous coverage of MEV on Unchained:

The Debate Over Ethereum MEV: Should It Be Minimized or Boosted?: https://laurashin.bulletin.com/the-debate-over-ethereum-mev-should-it-be-minimized-or-boosted
The Other Side(s) of Ethereum's MEV Argument: https://laurashin.bulletin.com/the-other-side-s-of-ethereum-s-mev-argument

MEV

What is MEV: https://ethereum.org/en/developers/docs/mev/#:~:text=Maximal%20extractable%20value%20(MEV)%20refers,of%20transactions%20in%20a%20block
Proposer-Builder separation: https://www.alchemy.com/overviews/proposer-builder-separation
Uri’s blog post: https://medium.com/@uri_61495/flipping-the-table-on-the-mev-game-dc31df8baaf7
MEV Profit sharing validators: https://www.recvc.com/mev-2-0-the-rise-of-mpsvs/
Panel conversation mentioned in the episode (39:53): https://youtu.be/UKfBFV1TuEM?t=2393
Sealed auction design: https://ethresear.ch/t/mev-sgx-a-sealed-bid-mev-auction-design/9677
Priority Gas Auction (PGA): https://www.mev.wiki/terms-and-concepts/priority-gas-auctions#:~:text=What%20is%20a%20priority%20gas,up%20fees%20for%20other%20users.
Dune’s dashboard - amount of MEV extractors: https://dune.com/queries/1171509
The MEV Game of the Crypto Economy: Osmosis' Threshold Encryption vs. SGX of Flashbot?: https://mirror.xyz/infinet.eth/SFjR1H1-RMnKoIoPjqkxpauVPrLYGqLHQP1dY9FHvx4
Bank of International Settlements report on MEV: https://www.bis.org/publ/bisbull58.pdf

Flashbots

Flash Boys 2.0 paper: https://arxiv.org/pdf/1904.05234.pdf
Flashbots Dashboard: https://dashboard.flashbots.net/
Flashbots auctions: https://docs.flashbots.net/flashbots-auction/overview
Flashbots relay open source: https://twitter.com/hasufl/status/1559908331145265156?s=20&t=gtHe5sVetxQXVKfZL2VMYg
MEV Boost: https://www.alchemy.com/overviews/mev-boost
MEV in ETH PoS: https://writings.flashbots.net/writings/mev-boost-call-for-testing

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