133 - Flashbots and MEV

Transcript

[Music] welcome, to, bankless, where, we, explore, the frontier, of, internet, money, and, internet finance, this, is, how, to, get, started, how to, get, better, how, to, front, run, the opportunity, this, is, ryan, sean, adams, i'm here, with, david, hoffman, and, we're, here to, help, you, become, more, thankless, guys great, episode, for, you, today, on, the, topic of, flashbots, on, the, topic, of, mev, on, the topic, of, crypto, dystopia, versus, crypto utopia, and, how, we, propagate, the, utopia this, is, an, insanely, important, topic, to cover, we're, going, to, talk, about, a, few things, a, few, things, to, look, for, during this, episode, number, one, why, this, thing called, mev, that, is, maximum, extractable value, why, it, poses, an, existential, risk to, everything, we, are, building, in, crypto

we, are, on, this, knife's, edge, between dystopia, and, utopia, number, two, what, the world, looks, like, if, we, ignore, the, mev problem, we, cannot, not, afford, to, ignore it, number, three, the, blockchain, supply chain, what, actually, is, that, how, mev, can increase, your, eat, staking, rewards, by something, like, six, percent it's, defined, as, the, map is, a, very, high, number, number, four, how all, this, technology, is, getting, getting embedded, in, the, ethereum, protocol, long term, in, something, called, pbs, that, is proposer, builder, separation, we, get, into the, ethereum, roadmap, a, little, bit, number five, what's, next, for, flashbots, after this, thing, called, pbs, is, deployed, and makes, them

obsolete, we, talk, about, the, flashbots organization, as, well, david, there's, so much, here, um how, would, you, rate, the, the, this, episode in, terms, of, like, um skill, level, or, knowledge, level, is, this accessible, enough, for, the, the, straight beginner, does, the, severe, towards, a little, bit, expert, level i, think, if, you, have, not, heard, the, term mev, before you, are, going, well, first, off i, remember, my, first, time, i, heard, mev, and like, if, you, like, rabbit, holes, i'm, so envious, of, you, going, down, the, med, rabbit hole, for, the, first, time, was, so, much, fun if, you, have, not, yet, heard, of, mev, this episode, should, be, fine, uh, but, it, it'll it'll, start, fine, it'll, get, challenging

towards, the, end, but, overall, it'll, throw you, down, a, fantastic, rabbit, hole, the, mev part, of, this, crypto, industry, has attracted, some, of, just, straight, up, the gigabrains, like, all, the, giga, brains, just get, attracted, to, to, mev, because, it's such, a, complex nuanced, problem, to, solve, with, so, much, at stake, there's, a, lot, at, stake, if, we, do not, solve, mev, or, if, we, solve, it incorrectly, uh, and, so, there's, just, the these, certain, types, of, people, that, have really, been, captivated, by, the, mev problem, and, have, really, put, some, of, the the, highest, amounts, of, iq, on, all targeting, the, same, problem, which, is solving, systemically, how, to, solve, the mev, problem, just, really, really, quick, the mev, problem, maximally, extractive, value is, this, thing, that, we, discovered, back, in

like, 2017, or, 2018, as, a, function, of, smart contract, blockchains, where, you, have, defy and, anytime, that, you, make, a, trade, on like, uniswap, you, you, imbalance, a, pool right, like, if, you, are, trading, usc, and eth, and, you're, you, put, in, uscc, and, you pull, out, eth, that, changes, the, pool, that changes, the, price, and, arbitragers, can come, and, re, rebalance, that, pool, as, a function, of, how, it, relates, to, other exchanges, so, it'll, it'll, balance, it'll it'll, balance, out, like, the, price, of these, things uh, you, can, also, talk, about, mev, in, the context, of, uh, like, liquidations, on, maker dow, or, or, ave, it's, basically when, users, use, a, smart, contract blockchain, they, leave, arbitrage opportunities, in, their, wake, and, so

arbitrage, bots, will, come, and, make transactions, to, pull, out, some, of, that value, they'll, rebalance, the, pool, take, a little, bit, of, arbitrage, and, this, is, all normal, and, healthy, but, there's, it, gets more, and, more, malicious, as, you, get further, down, the, mev, rabbit, hole, there's like, front, running, uh, and, so, they, if, you were, trading, on, you, to, swap, you, can, get front, run, by, a, bot, and, they'll, sell, you you, what, you, were, going, to, buy, but, at, a higher, price, that, starts, to, get, a, little bit, malicious, and, it, can, go, it, can, go down, to, what, some, people, will, just define, as, straight, up, theft, and, it, can even, get, even, more, systemic, than, that, it can, start, like, disrupting, actual blockchains, as, in, like, a, couple, blocks will, have, passed, but, there, was, an, mev opportunity, that, was, so, incredibly

lucrative, that, mev, like, people, will, try to, actually, unwind, the, blockchain, and, go backwards, for, blocks, in, order, to, capture that, opportunity, before, going, forwards again, so, like, not, only, is, it, just, about arbitrage, it's, about, just, like, you, know bot, attacks in, the, mempool, but, also, destabilizing the, blockchain, and, so, it's, critically important, that, we, get, this, right, so that's, like, your, quick, tl, dr, uh, rabbit hole, on, mev, and, flashbots, is, an organization, people, that, have, targeted this, problem, directly, uh, creating, this sort, of, sandbox, if, you, will, for, mev players, can, play, in, this, sandbox, that doesn't, impact, like, users, maliciously, or disrupt, our, blockchains, uh, and, and staphon, here, is, one, of, the, one, of the co-founders, of, flashbots, and, uh, has, a

lot, to, say, with, what, where, flashbots currently, is, in, this, proof, of, work, uh paradigm, but, also, where, it's, about, to, be in, this, proof, of, stake, paradigm, because proof, of, stake, definitely, changes, uh, the game, of, mev, and, the, role, that, flashbacks has, to, play, in, this, ecosystem, absolutely guys, you, find, there, are, there, are, some strange, god, mode, type, abilities, uh, in the, transaction, ordering, of, our, blocks and, that, is, the, source, of, of, mev, mev's power, where, a, certain, party, has, the ability, to, order, blocks, in, a, certain, way anyway, we're, going, to, get, into, all, of this, it's, a, fantastic, episode, and, how, we solve, it, how, it, relates, to, the, ethereum roadmap, uh, and, by, the, way, guys, if, you are, watching, if, you, want, to, watch beckless, podcast, on, video, you, could, do things, do, that, on, on, youtube, but, you, can

also, do, it, now, on, spotify, so, um, all bagless, podcasts, are, now, published, on spotify, with, video, so, you, can, go, ahead and, check, that, out, let's, get, right, into the, conversation, with, stefan, from flashbots, but, before, we, do, we, want, to tell, you, about, the, fantastic, sponsors that, made, this, episode, possible, lens protocol, is, an, open, source, tech, stack for, building, decentralized, social, media applications, it, is, the, new, era, for social, media, we, all, have, toxic relationships, with, our, web, 2, apps, we want, to, break, up, with, them, but, we, can't these, applications, own, our, digital, lives and, all, the, relationships, that, we've made, we, need, to, break, through, to, a, new paradigm, of, social, networking applications, that, we, control, rather, than them, controlling, us, lens, isn't, a, social media, app, it's, a, protocol, to, let, a thousand, web3, social, apps, bloom, lens, is

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zksync.io and, yes, there's, also, going, to, be, a, token so, give, them, a, follow, on, twitter, too, at zksync, hey, bankless, nation, we're, super excited, to, introduce, you, to, our, next guest, on, a, very, important, topic, today this, is, stefan, gosselin, he, is, the founder, of, flashbots, what, is, flashbots it's, an, r, d, organization, that's, research and, development, it's, trying, to, fix, what we, think, is, one, of, the, most, pernicious problems, in, crypto, maybe, the, most pernicious, the, problem, of, mev, that stands, for, maximum, extractable value, and, while, david, and, i, are massively, optimistic, about, crypto, we're not, really, worried, about, too, much in, crypto, i, mean, we, think, this, thing, is going, to, be, pretty, much, inevitable, we are, kind, of, worried, about, mev

it, could, really, be, achilles, kryptos achilles, heel, so, we're, going, to, talk about, it, today, with, somebody, who, is, um trying, to, solve, this, problem, and actually, uh, whose, work, in, flashbots, is getting, ready, to, become, important, enough to, actually, get, embedded, in, the, core ethereum, protocol, so, we'll, talk, about that, as, well, uh, staphon, welcome, to bankless, how, are, you, doing, today hey i'm, doing, great thank, you, so, much, for, having, me, this, is exciting, always, a, pleasure, to talk, with, more, people, about, yes, the, very scary, problem, of, nav, well, i, can't promise, you, about, the, smart, part, but, um hopefully, you, bring, the, intelligence, for david, and, i, because in, fact, you, know, what, we, want, to, we, want to, kind, of, start, at, the, um, the, less smart, level, of, this, uh, mev, problem, so, i

i, called, it, the, most, pernicious, problem in, crypto, um, do, you, think, we're, like blowing, this, out, of, proportion, can, you tell, us, why, mev, is, impo, important, at, a high, level, and, what, it, is, for, somebody who is, just, now, hearing, about, it yes, so, um no, i, don't, think, you're, blowing, it, out of, proportion, though i, am, very, biased, in, saying, that, uh, we did, you, know, literally, get, every, single person, that, we, could figure, out, that, agreed, with, this, point of, view, together, sometime, in, 2020, and start, this, organization, together, that's sole, mission, is, to, figure, out, how, to solve, the, problem, fmev, so, i, am definitely, in, my, little, mav, bubble, where

i, spend, all, my, day, and, night, thinking about, it and, worrying, about, it um, so, why, why, am, i, in, this, bubble, why why, did, i, surround, myself, with, a, bunch of, people, who, who, worry, about, this well, mev, is, sort, of, this, emergent phenomenon, that, we've, observed, on, smart contract, blockchains, when, people, start to, actually, use, them what, we, realize, is, that, there's, a, lot, of different powers, that, miners, have that, they, can, use, to, extract, sort, of extra, value, out, of, the, protocol, in, ways that, the, protocol, wasn't, necessarily designed, for, um so, when, the, initial, sort, of, paper, by, by phil, diane, came, out, and, defined, the, term minor, extractable, value, it, looked, at

things, like, reordering, censorship and, insertion, of, transactions, um, within blocks, looking, at basically, arbitrage, opportunities, on decentralized, exchanges and, how when, you, have, miners, that, start, to target, these, they, might, do, things, like doing, reorg, attacks, against, the, chain, um and and, some, some, other, sort, of, nasty behavior, um at, the, time, it, was, mostly, like, a theoretical, uh you, know, paper, that, looked, at, okay, well here's, what, would, happen, if, these, dexes would, get, a, lot, of, uh, of, traction, and, lo and, behold, a, couple, years, later, they, did um, and, so, and, around, you, know, summer

2020, during, during, d5, summer, we, started seeing, a, lot, of, these, bots, becoming, very active, to, the, point, where, it, started having, sort, of, a, negative, impact, on, on the, rest, of, the, system the, two, years, following, that, so, between summer, 2020, and, and, where, we, are, today has, just, been, sort, of, an, explosion, and sophistication of, activity, on, ethereum, but, also, in every, single, other, smart, contract, chain that, has, any, sort, of, meaningful, economic activity and, we've, seen, sort, of, the, space, go, from very, simple, sort, of, arbitral, strategies to, evolving, into, um, like, very, complex generalized, front-running, liquidations cross-domain, arbitrage, uh, all, kinds, of nft, sniping, and, strategies

that, uh, that, have, just, created, a, ton, of of, demand, and, activity, for, um, for, for these, chains um, you, know, the, role, that, flashbacks plays, in, all, of, this is we, see, mev, as, being, uh, probably, the biggest, centralization, risk, for, krypto um, the, way, to, think, about, it, is if, chains, aren't, actively, thinking, about mev, in, their, design, they, are, guaranteed to, make, some, fatal, mistake, that, will, you know, have, some, negative, externalities, on their, users, or, cause, them, to, become, very heavily, centralized, so, we, sort, of, take, a research, first, approach, of, saying, okay we, know, that, this, is, a, risk, let's, try, to understand, it, better

and, then, let's, develop, solutions, that help, blockchains, deal, with, this, risk so, we, launched, on, ethereum, and we, have, this, solution, mevgeth, on ethereum, that's, running, with, all, the miners and, then, we're, preparing, as, everyone, is for, the, transition, to, the, proof, of sleep so, fine, before, we, go, into, uh, flash, boss and, mev, geth, and, some, of, the, solutions to, this, problem, i'd, really, just, like, to define, the, scope, of, the, problem, a, little bit, more at, the, very, basic, level, mev, is, just basic, arbitrage, opportunities, um, there's a, difference, in, the, eth, price, between uniswap, and, balancer, and, uh, an, mev, bot can, arbitrage, those, differences, and, and so, like, in, theory, the, idea, is, that, some

bot, will, come, in, and, balance, out, those two, pools, but, then whoever's, actually, mining, the, block, will see, that, bot, come, in, and, they, will, front run, that, bot, and, they, will, they, will balance, those, two, pools, instead, and, they will, be, able, to, pull, out, that, arbitrage they're, just, able, to, arbitrage, faster and, at, this, level, if, the, things, aren't all, that, crazy, things, aren't, all, that evil, or, so, and, this, is, kind, of, actually considered, healthy, in, the, ecosystem, in the, d5, ecosystem, you, know, pool, liquidity pools, stay, balanced, faster liquidations, and, ave, your, compound happen, faster, keeping, those, systems, more robust, so, there's, like, a, lot, of, good, mev that's, out, there, that, just, helps stabilize, the, defy, ecosystem, and, like it's, almost, uh, synonymous, with, just general, arbitrage, and, this, part, of, mev we, don't, really, have, a, problem, with, can

you, illustrate, the, worst, part, though, the more, dark, side, of, mev, the, evil, side, of mev, down, to, the, point, of things, that, are, considered, ethically poor, or, ethically, dubious, but, also, down to, the, point, of, like, destabilizing, a blockchain, can, you, take, can, you, tackle those, two, things, as, to, like, the, bad, side of, mev yeah, you, know, this, is, where, even, a, good thing, has, is, drawbacks, right, so in, many, ways, mev, is, what, makes, a lot, of defy, systems, works, it's, what, makes, amm possible, like, amms, you, would, not, be, able to, be, a, passive, liquidity, provider, if there, wasn't, someone, doing, arbitrage between, unit, swap, and, binance, right, it just, would, not, work, as, a, strategy, and

like, no, one, would, use, a, system, but because, there's, someone, doing, that arbitrage, the, prices, on, on, uniswap, were able, to, stay, in, sync, so, it, has, some value, there, similarly, for, liquidations right if, you, run, a, liquidations, protocol that's, using, some, kind, of, oracle, system you, need, some, bot, operator, to, come, in and, actually, execute, the, liquidation, to say to, keep, the, the, collateral, ratio, of, the of, the, lending, platform in, balance and someone, literally, just, needs, to, like send, the, transaction, that, triggers, this function, and, that, is, mev, is, rewarded, in some, way, so, you, know, mev, good, mev, is really it, takes, place, when, a, protocol, or, like adapt, designer, thinks, about, okay, what

are, the, permissionless, functions, in, the system, that, we, want, to, incentivize, third parties, to, take and, then, how, much, money, do, we, need, to pay, them, to, take, these where, it, can, start, to, become, a, little bit, more, questionable, and, nefarious, is when, uh, protocol, developers, and, and, app developers do, not, think, about, the, mev, that's exposed, through, just, regular, user interactions, so, when, their, users, start to, interact, with, their, protocol, they might, actually, be, exposing, some, mev, as well and, that, might, have, some, negative, uh sort, of impact, on, their, experience, so, you, know on, on, unit, swap, for, example, the, example the the, case, that, happens, quite, frequently

right, is, you, set, your, slippage, limit, too high, um, and, then uh, send, a, transaction, for, a, swap, into the, transaction, pool, some, bot, operator out, there, sees, this, they, uh sandwich, your, transaction, and, provide you, the, the, worst, uh, the, worst, execution that, you, accepted, using, your, slippage limit, right, and, so unit, swap, by, like, allowing, users, to, set high, slippage, limits, and, like, allowing them, to, send, it, to, the, transaction, pool might, in, many, ways, be, giving, them, a worse, price execution, um, and, so, those, kinds, of behavior, end, up, being, sort, of, you, know less less, beneficial, to, the, end, users, because there, isn't, really, any, reason, for, the system, to, have, these, um, this, this, kind

of, value, exposure got, it, so, like, what, you, just, described is, maybe, um in, a, bad, mev, scenario, the, user, gets ripped, off, a, little, bit, right, there's some, you, know, additional, cost, that they're, paying, to, these, kind, of, mev, um rent, collectors, but, can, you, take, that, a little, bit, further, so, like what, is, the, worst, case, scenario, here, and i'm, i'm, almost, like, maybe, talking, more from, a, system, perspective, rather, than the, kind, of, the, user, so, the, user experiences, this, in, that, like, they're getting, ripped, off, in, small, ways, here and, there, maybe, they, notice, maybe, they don't, i, would, have, to, get, really, really bad, for, them, to, to, maybe, like, fully notice, but, i, think, there, are, some, more pernicious, uh, like, system, level, attacks

and, i, want, to, ask, the, question, of, like okay, so, this, is, a, problem, but, what happens, if, we, just don't, solve, it, like, what, happens, if, we just, like, leave, it how, will, the, system, uh, evolve in, that, condition yes, so um, i, sort, of, mentioned, briefly, negative externalities, um, i, think from, a, system, designer, perspective, from the, perspective, of, ethereum, core developers, solano, core, developers whoever, right, who's, looking, at, how, do, i build, a, blockchain um, you, have, to, see, okay, what, incentives am, i, creating, by, these, like, different mechanisms, i'm, implementing, um three, ways, in, which, like, mev, tends, to, be

extracted, is, either a, spam, war a, latency, war or, an, auction this, is, like, different, ways, that, you allocate, opportunities, or, you, design, a system, of, block, space, and, how, um competition, for, that, block, space, ends, up being targeted, is, using, one, of, these, three systems, and, each, of, these, have, these negative, externalities, right, so, if, you use, some, kind, of, system, that, says, we're going, to, order, transactions, randomly right, all, the, transactions, are, going, to be, hashed, and, like, ordered, by, the, hash something, like, this, then you, can, have, bots, that, like, still, target these, arbitrage, opportunities, by, sending thousands, of, transactions, into, the

transaction, pool, um, and, hoping, that, one of, them, is, going, to, be, the, one, that, that targets, the, opportunity, um, and, that, what that, does, is, it, takes, up, a, ton, of, block space, and, crowds, out, regular, use, cases um, if, you, use, a, system, that, says, okay, we come, we, take, first, in, first, out, ordering and, we, say, whoever, is, the, first, to submit, a, transaction, is, going, to, be, the one, that, gets, the, the, block, space then, all, of, a, sudden, you, create, sort, of a, race, or, an, incentive, for, everyone, to invest, very, very, heavily, into co-location, so, you'll, have, um, basically the, most, dominant, validator, or, miner selling, sort, of, server, racks, next, to their, uh, to, their, ethereum, nodes, saying you, know, whoever, is, willing, to, pay, me the, most, for, this, immediate, access, is

going, to, be, able, to, capture, these opportunities um, that, creates, a, huge, centralization vector, at, the, validator, level, right, so now, all, of, a, sudden, you, have, you, know whoever, is, the, best uh, minor, validator, at, doing, this arbitrage, um, or, at, selling, colocation services, is, going, to, continue, accruing more, uh, rewards, than, all, the, other validators, and, can, start, to, sort, of, take over, the, network, and, and, start centralizing, it um, and, then, the, final, option, on, like, how to, deal, with, with, mev, is, is, what, we, call uh, block, space, block, space, markets, right or, or, block, space, auctions, which, is, sort of, the, the, the, solution, space, that, that flashbots, has, been, building, towards which, is, saying, actually

let's, not, you, know, focus, on, this, latency war, with, with, validators, and, miners let's, let, them, outsource, completely, the block, construction, to, to, third, parties let, third, parties, compete, on, price, as opposed, to, co-location, and, whoever, is willing, to, pay, the, most, for, the, block space, is, the, one, that, ends, up, being selected, and, included so, stefan, like, take, a, one, one, blockchain that, decides, to, kind, of, like, solve, this make, it, into, the, protocol, like, you, know do, something, about, mev, and, another, chain that, doesn't like, what, happens, to, the, chain, that doesn't, does, it, and, like, does, this, just kind, of evolve, back, into, the, existing, financial system, we, have, where, we, do, have co-location, we, do, have, like, you, know

flash, boys, and, all, of, these, things, like uh, i'm, just, trying, to, get, a you, know, escape, of, the, dystopia, if, we let, mev, run, wild, and, we, actually, don't make, protocol, changes, and, and, don't decide, decide, to, um, build, solutions, to address, it, you, said, centralization, but like, sometimes, that's, um, it's, hard, for people, to, get, in, there, in, their, heads because, they, don't, see, how, this, abstract idea, of, centralization, actually, affects them, so, yeah, let's, try, to, paint, sort, of a, picture, of, what, two, different, like futures, looks, like, we, had, this, um, with this, conference in, amsterdam, a, few, months, ago that, was, themed, around, the, mev, utopia and, the, mev, dystopia

and, the, reason, why, i, think, it's, quite powerful, to, draw, this, comparison is, to, try, to, give, more, of, a, feeling, for what, these, two, different, futures, look like, and, the, impact, it, has, on, users, of these, systems, um so, we, can, start, by, the, the, dystopia, side so, um, let's, say, you, have, a, chain, that, um doesn't, like solve, much, for, mev, it, doesn't, implement a, an, mev, block, space, auction, it, has, a dominant, strategy, of, co-location, and perhaps, the, validators, start, to, to, sell sort, of, collocation, services, right, what you, end, up, having, there, is, you, have, a single, entity who's, investing, very, heavily, in, these mev, strategies

become, somewhat, gatekeepers, to, to, the chain, perhaps, they, start, running, the majority, of, the, validators, on, this, chain and, they, start, aggregating, the, majority of, the, order, flow, because, they, control most, of, the, block, space, so, now, all, of, a sudden, every, single, entity, or, user that's, trying, to, send, a, transaction, to this, chain, has, throughout, their transaction, through, the, server, of, this of, this, mega, fund, this, mega, mev, fund, um you, know, this, mega, mev, fund, then, has, the power, to, arbitrarily, sensor, control, sort of, uh, any, protocol, changes, uh, issues sort, of, um, uh uh, you, know, soft, forks, that, that, that control, in, one, direction, or, another, um and, like, overall, just, have, you, know, more

influence, over, the, system, um, so, it undermines, this, property, that, we, want, of blockchains, which, is, uh permissionlessness, and, and, makes, these blockchains, trend, a, lot, more, towards what, uh, what, you, know, traditional financial, systems, look, like, right, you have, broker, dealers, and, then, you, have like, a, few, internalizers, um, and, then, uh and, then, like, a, few, exchanges, that, are all, sort, of, permissioned, entities, with, a lot, of, um, a, lot, of, certifications, and um, and, and, sort, of government-induced, monopolies, over, the work, that, they, do, um, that, restrict, what they're, able, to, do this, is, the, less, permissionless, future the, uh, the, dystopic, future, under, the utopic, future, we, sort, of, maintain

how, transactions, and, blockchains, have worked, historically, right, which, is, you can, send, transactions, to, you, know, a local, node, or, a, local, system, um, with high, confidence, that, it, won't, be censored, somewhere, between, when, you, sent it, and, when, it, gets, uh, included, and finalized, into, the, chain, um, and, you, have some, clear, understanding, over, what, are the, different, steps, that, this transaction, took, you're, not, just, sending it, into, like, a, black, box, where, you, don't really, know, how, much, you're, paying, or like, what's, happening, to, it, but, you, have some, transparency, over every, step, of, the, system, you, know who, is, operating, on, top, of, it and, you know, what, value, are, they, taking, from, it um, so, so, we, call, this, the, uh, the, mev

utopia, um there's, also, this, idea, of, of, the, mev supply, chain, so so, this, is, something that, that, maybe, um, listeners, can, can look, up, the, mev, supply, chain, aims, to define who, are, the, different, actors, that, are operating, on, the, transaction, between when, the, user, has, an, intent, to, issue, a transaction, and, when, it's, finalized and, looking, at, if, we, are, trending, more towards, utopia, or, dystopia, is, actually just, looking, at, how, vertically integrated, is, this, supply, chain, is, it sort, of, a, single, entity, that's, doing, all of, these, uh, or, is, it, more, modular, where each, entity, or, each, service, added, um, is done, it, by, a, different, entity, in, sort, of

a, modular, way, that's, good, and, i, think, we want, to, talk, more, about, the, the, the supply, chain, the, mev, supply, chain, in, a little, bit, but, i, i, just, want, to, paint this, picture, for, um, backless, listeners who've, been, with, us, on, the, journey, from the, beginning, the, dystopian, the, utopia one, way, to, describe, that, using, our parlances the, dystopia, is, the, existing, banking system, that, we, have centralized, actors, highly, permissioned you, have, to, ask, them, in, order, to, engage with, your, banking, services and, the, utopia, solution, where, we, solve parts, of, mev is, the, bankless, system, that, we're striving, for, so, you, can, see, why, why, it's such, like, a, it, sounds, like, such, a, heady topic, like, mev, maximum, extractable, value

and, we're, talking, about, terms, like, you know pbs, protocol, builder, separation, and, all of, these, things, but, this, is, really, core like, we, actually, need, to, fight, for, this in, order, to, get, the, bankless, money system, financial, system, that, we, actually want, like, at, some, level, everything hinges, upon, this and, the, outcome, will, decide, whether we're, left, with, the, old, system, we, left or, a, new, bankless, system, where, everyone can, be, their, own, bank, that's, why, this, is so, important, david, i, think, you, wanted, to say, something yeah, the, the, only, thing, i'll, i'll, add, to that, is, that, the, people, that, identified mev, very, early, on, like, phil, diane, really brought, it, to, the, world, and, then, uh, with his, presentation, early, early

presentation, i, believe, it, was, the, flash flash, boys, 2.0, presentation, which, really um pulled, some, very, similar, patterns, that we've, seen, in, the, stock, market, which, uh stefan, you've, already, kind, of, identified as, like, co-location, right, there, are there, are, these, high, frequency, traders in, the, traditional, stock, market, that, are like, fiercely, competitive, with, each other, and, like, very, specific, on, how, long of, a, length, the, fiber, octaves, cables, are between, them, and, like, the, new, york, stock exchange, because, they, can, get, their trades, in, quicker, and, then, they, can collect, all, the, value, and, so, when, we when, phil, diane, and, others, in, this, base identified, this, thing, called, with, that that, they, that, they, dubbed, mev they, were, they, could, predict, this, in, the future, that, a, a, new, equilibrium, will

become, established, as, a, result, of, mev and, that, particular, equilibrium, is, one that capital, creates, capital, at, a, faster, rate than, what, we, are, really, comfortable, with in, a, way, that, does, not, create decentralization, it, creates centralization, vectors, and, so, when stefan, here, is, talking, about, like, the supply, chain of, block, buildings, the, supply, chains, of a, transaction, uh, and, he, as, stefan, you said, it's, good, if, it, was, horizontal rather, than, vertical, with, many, many different, participant, participants playing, rather, than, one, central, actor that, is, what, we're, trying, to, do, is create, an, equilibrium, that, is, something else, than, what, we, would, just, see, if, we just, let, mev, go, rampant, without, trying to, solve, it, so, stefan, like, uh, leading

into, this, a, little, bit, more, like, you, you talked, about, like, um, there's, like, the three, different, outcomes, of, like, mev there's, like, the, spam, attacks, where, like um, uh, mev, extractors, will, try, and, just like, fill, a, blockchain, with, all, their transactions, as, many, as, possible, the other, one, is co-location, which, we've, already, seen, in the, traditional, world, and, then, the, third one, is, something, like, flashbots, and, what we're, going, to, be, talking, about, for, the rest, of, the, podcast, um, the, theme, with pod, with, flashbots, is, that, this horizontal, supply, chain really, what, we're, talking, about, is, we're putting, something, into, a, marketplace everything, that, would, otherwise, be centralized, we're, finding, mechanisms, to turn, that, into, a, competitive, marketplace can, you, talk, about, this, strategy, of making, the

mev, extremely, competitive and, turning, it, into, like, a, public, market and, how, this aids, in, our, effort, to, make, sure, that, uh the, equilibrium, that, we, are, creating, is one, that, stays, in, a, decentralized, world yeah um it's, really, interesting, so, um, a, lot, of my, background, is, sort, of, a, mix, of computer, science, and, like, market structure, um, uh, theory, um, and, if, you look, at, like, a, health, of, of, a, market, or industry, um, in, terms, of, competitiveness you, know, like, anti-trust, laws, a, lot, of it, centers, around, barriers, to, entry, um this, is, why, i, think, the, the, med, supply chain, you, know, description, is, quite useful, if, you, if, you, look, at, the, supply chain, as, what's, the, barrier, to, entry, for

a, new, actor, to, come, in, and, start participating, in, one, of, these, like economic, roles, you, directly, start, to think, about, you, know, competition, how much, competition, is, there, in, this, market and, when, you start, to, think, about competition, you, also, start, to, think about, how, decentralized, and, and permissionless, um, is, it, um, so um, you, know, this, this, framework, of of, competition, is, that, is, the, most useful, way, to, to, start, analyzing, how, how the, ecosystem evolves, on, map so, you're, talking, about, a, competitive equilibrium, like, why, so, why, is, this equilibrium, important, to, maintain yeah, so, um there's, a, couple, aspects, to, to, the competition, that, we, can, look, at, right

there's, the, just, the, competition, between individual, uh, miners, or, validators, right and, we, all, want, these, validators, in, the ideal, case, to, be, extracting like, a, proportional, amount, of, value, to the, amount, of, stake, or, the, amount, of hash, power, that, they, have, and, really that's, like, a, key, metric, that, we, look, at for, for, the, health, of, the, system, the competition, in, the, system, are, all, the validators, uh, in, in, a, given, chain accruing, value, at, the, same, rate, that's proportional, to, their, stake, or, are, they accruing, value, at, a, rate, that's disproportional, in, which, case, we, start to, see, trends, towards, uh, towards, more centralization, um, we, can, use, this, right same, model, of, evaluating, concentration

and, composition, at, other, layers, as, well right, are our, wallets, extracting, at, the, same, rate uh, fees, from, there, from, their, users, our bot, operators, you, know, capturing, value at, the, same, rate, as, as, other, bot operators, um you, know, this, this, this, concentration metric, of, of, the, market, is, useful, in each, of, these, uh, these, verticals, so let's, talk, about, that, for, for, a, minute in, the, current, state, right, so, i, think for, the, for, the, rest, of, this, episode, we might, talk, about, kind, of, like, you, know the, past, date, where, we, really, didn't, see much, mev, activity, maybe, didn't, need, much mev, protection, but, you, know, that's, kind of, the, past, now, we, want, to, talk, about the, present, state, of, uh, how, blocks, are

made, in, ethereum and, what, the, mev, supply, chain, looks, like and, i, think, we'll, get, to, kind, of, the future, state, where, things, get, really interesting, especially, in, a, post-merge world, something, really, big, happens, with this, thing, called, mev, boost, we, want, to talk, about, that, and, then, even, in, the kind, of, the, far, future, of incorporating, some, of, this, mev technology, as, part, of, the, ethereum protocol, there's, a, lot, to, unpack, here but, but, let's, start, with, the, present state, all, right, how, how, does, the, block get, made, in, ethereum, what, does, the, mev supply, chain, look, like, what, are, the parties, that, are, involved, and, how, do they, all, work, together okay, uh mev, supply, chain, crash, course, here, we, go

so, um right, when ethereum, initially, launched, the, idea, was everyone, would, run, their, own, ethereum node, right, and, they, would, send transaction, to, their, local, node propagate, it, over, the, peer-to-peer network, where, it, would, reach, a, minor, and then, the, miner, would, include, in, a, block and, then, propagate, that, back, to, the network, so, there's, really, only, two actors, involved, here, right, there's, the user then, there's, the, peer-to-peer, network and, then, there's, the, miner and, you, sort, of, route, transactions, to them, and, they, get, included eventually, right, we, have, these intermediaries, that, came, up, to, help users submit, transactions, and, and, sort, of, um clarify, the, intent, of, how, they, want, to operate, against, the, chain, um, so, i, would

classify, these, sort, of, parties, like, the metamasks, the, uniswaps, the, uh, the infurias, of, the, world, as, this, this wallet, layer, right, they, help, take, user intents, or, user, preferences and, then, convert, those, into, a transaction, that, then, they, relate, to, the peer-to-peer, network, and, then, like, makes it, all, the, way, to, a, minor, and, then, the minor, includes, it, in, the, chain, um, so great, we, have, this, additional, entity right, like, the, wallet application, um, entity, um, what, started happening, when, mev, opportunities, became very, big is, that, there, was, these, new, entities, uh operators, that, emerged, and, they, started looking, at, the, transaction, pool, and saying, oh, here's, a, transaction, that

creates, an, arbitrage, opportunity, let's send, an, other, transaction, that, either takes, this, arbitrage, opportunity, or front, runs, it, or, back, runs, it, or whatever and, then, included, in, the, chain eventually, they, realize, you, know, we're competing, on, sending, these, transactions over, the, transaction, pool, what, if, we were, able, to you, know, just, communicate, it, directly, to the, miner, and, not, have, to, use, the, same public, transaction, pool, as, as, users, did so, it, created, a, whole, other, side, channel right, to, the, public, transaction, pool where, where, users, are, used, to, sending our, transactions, where, transactions, are now, being, routed, directly, to, the, miners um, using, sort, of, a, different, network, um so, what, flashbacks, did, was, was, realizing

that, this, trend, was, emerging, and, then trying, to, provide, more, transparency, to it, so, create, sort, of, this, open permissionless, uh, market, where, you, could route, these, transactions, with, with, sort of, more, advanced, preferences, uh, to, to the, miners, so, we, now, have, this, sort, of other, uh, this, other, uh, intermediary, in the, system, right, which, is, the, user, sends preferences, to, a, wallet, the, wallet encodes, these, into, some, transaction those, transactions, make, their, way, over to operators, right, the, operators, then, do their, mev, thing, and, add, transactions, to it, and, then, they, send, those, transactions as, a, bundle, to, the, miners, uh, for inclusion, um, this, is, the, current, state of, the, world, this, is, how, ethereum, has

been, working, for, the, last, uh, year, and, a half, right, um, now, with, uh, with, the, merge quickly, approaching, we're, introducing yet, another, actor, into, this, into, this supply, chain, um, and, that, is, the, one, of the, builder so, we're, taking, the, role, of, the, miner right, and, then, we're, untangling, it, into two, different, roles, the, role, of, the block, builder, and, the, role, of, the, block proposer, so, a, block, proposer, is, just your, average, ethereum, validator, right anyone, who, has, 32, each, stake, and, is running, an, ethereum, full, node, um, what they're, doing, is, they, are uh, outsourcing, the, job, of, taking transactions, and, producing, sort, of, a maximal, value, block, to, this, you, know network, of, builders

so, this, builder, now, sits, between, the operators, and, the, validators, collects, a bunch, of, transactions, from, the transaction, pool, from, block, operat, from from, from, searchers, and, then, creates, an optimal, block, with, it, that, they, then provide, to, uh, to, the, validators, for inclusion, um so, that's, going, to, be, the, world immediately, after, after, the, merge, um this, is, powered, by, by, by, uh, by, what's called, pbs, right, block, proposer, block builder, separation, um, and, the, specific software, that's, used, to, achieve, this, is is, called, netboost, okay, so, so, um, you, you gave, us, kind, of, the, the, tour, the, warped tour, through, through, all, of, that, i, want to, kind, of, you, know, double, back, and, make sure, we, understand, um, you, know, the

present, and, then, getting, into, kind, of the, future um, so, the, present, state uh, for, the, first, like, i, don't, know, five plus, years the, first, um in, bitcoin, really, we, didn't, have, an, mev problem, and, the, reason, why, is, because, we didn't, have, smart, contracts, is, that, the case, staphon, so, we, started, to, notice these, mev, extraction, type, of opportunities, when, in, the, timeline, was this, like 2017, 2018, when, did, phil, and, others, start noticing, these, things so, 2017, is, when, i, started, uh, getting involved, and, i, think, some, of, the, initial explorations, of, mev, started, happening, on the, research, side, i, think, there's, always been, operators, understanding, where

opportunities, were but you, know, in, 2017, is, when, we, started seeing, icos, and, ico, sniping, which, is, mev we, also, started, seeing, sort, of, initial versions, of, bancor, and, ether, delta and, sort, of, the, exp, the, the, mev, that gets, exposed, by, by, those, early, d5 applications, um but, there, wasn't, really, meaningful volume, it, was, hobbyist, mvv, if, you, will it, was, all, sort, of, individual, operators that that, were, targeting, this, and, was maybe, like, five, different, people, doing this, um, and, when, when, things, really picked, up, is, when, you, know, smart contract, and, d5, really, picked, up, which was, uh, which, was, summer, 2010., okay summer, 2020, and, then, it's, accelerated from, there, i, would, imagine, uh, and, okay

so, enter, flashbots, it's, it, sounds, like there, was, sort, of, this, um, this, informal arrangement, this, informal, selling, of, of mev, or, you, know, paying, a, minor, in, order to, get, your, your, block, through, quicker it, was, all, very, uh, informal, but, go, over what, did, flashbots, do you, created, a, marketplace, i, believe, for this, mev, activity, and, made, it permissionless, transparent, and, back, to kind, of, the, the, core, idea, you, were talking, about, earlier, is, you, made, a competitive, uh, environment, for, it so, it, wasn't, an, insider, network, you, know talking, in, in, uh, telegram, quarters behind, the, scenes, to, make, these arrangements, it, was, completely transparent, now, open, am, i, getting, that

correct, and, how, would, you, describe, that yeah, so, the, biggest, risk, we, saw, was exclusive, access, to, hash, rate, right, um and, and, we've, seen, this, play, out, in other, chains, so, it's, been, really, nice, to see, our, sort, of, thesis, uh, be, accurate here because, this, exclusive, access, hasn't really, occurred, on, ethereum, but, but, how this, gets, expressed, is, you, know, a, large mining, pool, uh, you, know, the, largest, on on, ethereum, right, now, is, ether, mine would, say, okay, we, have, this, mev opportunity, here, we, know, we're, in, the like, best, position, to, extract, it let, me con, take, a, contract, with, some, mev, hedge fund, and, say, you, can, operate, our, nodes for, us, do, any, type, of, mev, extraction that, you, want, and, we, will, split, the

proceeds, 50, 50., right, wow, um, you, know the, the, mindful, is, happy, because, they're getting, additional, revenue, the, the, hedge fund, is, happy, because, uh, they're, they're they, get, to, exploit, these, opportunities and, and, collect, some, some, some, peace from, that, um, but, ultimately, this, is, this is, a, closed, market, there's, no, um, there's no, transparency, to, it, and, it, shrines sort, of, two, individual, parties, to compete, against, all, the, other, miners, and all, the, other, operators instead, what, we, thought, was, okay, well, we need, to, have, a, system, that, is democratic, transparent, and, is, able, to redistribute, uh the, revenues, or, the, the, the, value, that's accrued, through, mev, to, the, the

appropriate, stakeholders, um, and, so, the initial, auction, that, was, designed, um using, the, system, called, mevgeth uh, basically, did, this, right, it, allowed any, miner, to, start, accepting, um, these bundles, uh, from, uh, from, third-party, uh operators, um, and, then, include, them, into into, their, block, thus, accessing, um accessing, uh, uh all, of, the, mev, opportunities, available and, likewise, allowing, any, ball, operator to, start, sending, these, bundles, to, all the, miners, um, so, by, multiplexing, right all, the, bot, operators, with, all, the miners, all, of, a, sudden, you, can, have, this transparent, uh, auction, and, market, for for, price, discovery, and, geth me, v, geth, is, just, like, geth, is, uh, an

ethereum, client, of, course, that, miners run and, you're, just, adding, the, mev, software on, top, of, that, right, and, that, that's basically, what, the, miner, is, instead, of vanilla, gets, you, running, mev, geth, is that, correct it's, a, surprisingly, simple, change, like 100, lines, of, code, wow and, so, how, many, miners, are, running, this now so, yeah, about, um, 90, of, the, miners, have been, running, this, for, over, the, last, year now, um, and, yeah, because, it's, a, very simple, change, for, them, it's, it's, easy for, them, to, maintain, um, and, then, yeah, it allows, them, to, to, connect, to, this, this is, why, i, don't, know, if, ethereum, users are, aware, but, like, flashbots, has, been kind, of, like, a, silent, guardian, of ethereum, at, the, protocol, layer

protecting, it, get, us, against, some centralization, vectors, here, if, if, the mev, geth, was, not, available, what, do, you think, would, have, happened, with, ethereum over, the, last, couple, of, years, play, that scenario, out, for, us yeah, so you, know, the, place, to, look, at, for, the counter, factual, here, is, looking, at, other chains, that, don't, yet, have, sort, of, an mev, solution, is, this, basically, all, of them, or do, some, have, an, mev, solution basically, all, of, them, yeah, yeah, yeah and and, a, lot, of, them, have, experienced things, like, like, deep, reorgs, or, spam um uh, or, just, like, a, lot, of, concentration in, in, the, validator, or, hashrate, um access, no, we, we, hear, of, anecdotal, uh

but, many, of, these, networks, you, know, over 70, 80, percent, of, the, hash, rate, or validator, power, being, controlled, by single, entities, even, though, on, chain, it looks, sort, of, distributed, amongst, a large, set, of, validators because, they, can, then, sell, all, that block, space, in, bulk, to, uh, to, third parties, um, and, connect, and, collect, sort of, uh, uh, revenues, from, that, um, in, a, in, a sort, of, off-chain, manner, um so, so, there's, a, lot, of, uh, much, uh shadier, things, you, know, going, on, in, in these, other, chains, that, don't, have, these permissionless, democratic, transparent, uh uh, marketplaces, so, we, already, have, the dystopias, we're, not, really, waiting, for them, we, already, have, them, like, what

you're, trying, to, prevent, is, from ethereum, specifically, and, maybe, for change, in, the, future, from, becoming dystopias yeah, um, that's, true, um i, mean we, have, it, and, we, don't, you, know, some, of these, other, chains, are, are, just, much more, centralized, by, nature, as, well, right just, the, way, that, they've, uh, done, sort of, ecosystem, development, um, a, lot, of, you know, the, chains, are, controlled, by, the foundation, and, then, the, foundation, can have, a, lot, more, say, over, the, type, of activity, that, that, ends, up, happening, um but uh, you, know, for, the, for, the, more decentralized, ones, then, we, have, seen, a lot, of, this this, sort, of, concentration, through through, mev, um, we, have, seen, this, sort, of dystopia, emerge

it, still, is, the, case, today, that, the majority, of, economic, activity, sort, of, by by, orders, of, magnitude, is, is, on, ethereum so, um, you, know, our, stance, at, flashbots is, if, there's, one, place, to, protect decentralization, it's, on, ethereum, and then, hopefully, whatever, abstractions, and and, solutions, that, we're, able, to, develop uh, in, this, ecosystem, can, then, be, ported over, to, uh, to, the, other, ecosystems i, wanna, drill, down, on, two, parties, really quick, really, just, to, emphasize, why, this new, equilibrium, emerges, with, flashbots uh, so, we, talked, about, earlier, there's, uh the, the, largest, ethereum, miner, uh, spark pool, is, that, is, that, the, the, largest, one there, used, to, be, no, it's, just, mine, ether mine, uh, and, then, say, let's, have, some

like, you, know, imaginary, like, prop, desk jump, capital, for, example, uh, drum, capital and, ether, mine, make, a, handshake, and, be like, all, right, uh, sparta, uh, jump, capital says, the, spark, pool, give, us, all, of, your order, flow, like, show, us, all, of, your transactions, so, we, can, do, all, of, our, mev and, spark, and, spark, pools, like, okay, sure great, like, mutual, mutually, beneficial relationship, to, the, loss, of, every, other non-spark, pool, non-drum, capital, entity the, reason, why, if, you, are, a, miner, and you, are, a, miner, is, like, sending, your hash, power, to, spark, pool, or, or, just, a minor, in, general, or, you're, the, other party, you're, an, mev, arbitrager, like, you know, balancing, unit, swap, pools, doing liquidations, on, maker, dow, the, reason, why you, would, choose, um, flashbots, instead, of

choosing, spark, pool, or, if, you're, drum capital, i, guess, if, you're, an, mme, mev miner, you, can't, join, drum, capital, that's kind, of, the, problem, um, the, reason, why you, would, choose, flashbots, is, that, if you, are, a, miner, you, get, more, money, if you, choose, to, go, through, flashbots, than you, would, if, you, were, to, spark, pool because, spark, pool, is, giving, 50, of, that rewards, over, to, jump, capital, not, to, you and, so, there's, you, have, a, raw, financial interest, to, joining, flashbots, because you, pull, out, a, larger, proportion, of, that mev, if, you're, an, mev, bot, operator, and you, have, a, really, good, mev, like algorithm, highly, refined, well, if, you, you can't, join, drum, capital, so, you, have, to go, to, somewhere, else, and, you, got, to, go to, flashbots, because, it's, an, open

permissionless, marketplace, and, so, what flashbox, has, done, is, created, a, highly competitive, environment, that, is extremely, beneficial, to, proof-of-work minors, because, they, extract, the, most, mev that, way, and, it's, also, the, only, place where, mev, like, arbitragers, can, have their, like, playground, of, you, know sandbox, of, of, their, to, run, their, bots because, it's, the, only, open permissionless, marketplace, for, bot operators, so, flashbots, is, really, just like, a, meeting, place, for, hash, power, and mev, bots, am, i, explaining, this, uh correctly, what, would, you, add, on, to, that i, think, that's, exactly, right, um so, here's, one, thing, i, want, to, add, about this, um, we, spend, a, lot, of, time, thinking

about, incentive, compatibility, right, and we, think, that, the, only, systems, are robust, long, terms, are, ones, where, like every, single, actor it, doesn't, have, a, benefit, from, deviating right, so, this, is, you, know, this, is, the equilibrium, that, we, want, any, of, these cryptoeconomic, systems, to, have, everyone is, incentivized, to, play, the, same, game and, the, game, is, sort, of, beneficial, to, to all, the, other, actors, it, doesn't, have some, negative, externality, on, like, end users, that, they're, like, stuck, paying forever um so the, system, is, designed, in, this, way, right it, maximizes, the, amount, of, value, that miners, get, because, this, is, inherent, to mev maximal, extractable, value, right, like

they, own, this, value, and, so, the, only, way to, create, an, incentive, compatible, system is, one, where, they, end, up, extracting, the majority, of, this, value you, can, also, create, system, in, which, you minimize, and, like, reduce, the, amount, of mev, or, like, the, amount, that, miners, can can, operate, on, top, of and, those, i, think, are, also you, know, extremely, valuable, uh, uh, design approaches, um, but, they, sort, of, start, at the application, layer, right, they, start, by building, applications, that, just, do, not expose, as, much, of, this, value, in, the first, place, um, so, uh, incentive compatibility, here, is, is, crucial, to, have these, systems, that, um, that, everyone, is is, happy, to, adopt, it's, really

interesting, because, like, an, example david, that, that, you, were, just, saying, if you've, got, um, a spark, pool, and, they've, got, jump, capital right, it's, like like, what, we, know, is, going, to, happen over, time, if, there, was, no, flash, bots, in between, if, there, was, no, mev, geth, is, that spark, pool, gets, enough, money, and, they just, vertically, integrate, and, they, uh jump, capital, gets, enough, money, rather than, they, vertically, integrate, and, they buy, uh, spark, pool, right, and, then, it, all becomes, one, like, that, is, the, nature, of these, markets, where, even, somebody hearing, that, they're, like, well, it's actually, like, two, parties, well, no, it's not, going, to, be, two, parties, they're, just gonna, acquire, they're, gonna, consolidate they're, gonna, merge, they're, gonna integrate, it's, kind, of, the, way, like, you

know, disney, owns, freaking, every, brand they've, got, marvel, they've, got, star, wars they've, got, everything, it's, a, big conglomerate, that, is, the, nature, of, these types, of, capital, markets, unless, you enforce or, create, some, sort, of, decentralized marketplace, where, everyone no, one's, disadvantaged, and, everyone, has the, the, freedom, to, it, advantage, and you've, as, stefan, was, saying, earlier you've, lowered, the, barrier, to, entry, i just, wanted, to, make, that, point, too, as you, were, talking, david, i, was, thinking about, that, you, know, another, way, to, see this, is, like, if, we, allow, a, single, party to, have, sufficient market, power capital, to, be, able, to, purchase other, parties, and, like, integrate, they will, they, will, so, the, only, solution

is, to, try, to, maximize, competition, it's the, only, way, to, protect, the the decentralization, of, the, system well, the, other, solution, is, of, course top-down, regulation, but, you, know, maybe maybe, in, the, world, of, crypto, and, crypto people, that, actually, is, not, a, solution that's, actually, a, failure, scenario, so the, yeah, you're, right, the, only, solution is, is, bottom, up, competition, and, so, this is, why, this, this, solution, for, this, is, so elegant, and, so so honestly, like, what, makes, people, like, me and, ryan, like, really, optimistic, about the, future, that, we, can, solve, some, of these, centralization, problems, with natural, like, not, anti-trust, regulation but, anti-trust, mechanisms, like, which, are just, marketplaces, at, the, end, of, the, day like, making, sure, that, competition, can flourish, because, the, more, competition

there, is, you, know, the, better, it, is, for everyone, everyone, involved um, stefan, i'd, like, to, take, this conversation, into, the, next, phase, because this, is, we're, talking, about, the, current state, of, ethereum, but, ethereum, never never, stays, the, same, ethereum, is, about to, change, so, what, we've, been, talking about, so, far, has, been mev, guest but, as, we, go, into, proof, of, stake, post merge, we, get, into, a, future, state, of flashbots, which, you, guys, have, been working, on, tirelessly, for, for, many, many many, many, months, now, which, we, you, guys have, been, calling, mev, boost, can, you, talk about, mev, boost, and, how, it's, different from, me, v, geth yes, so um, we, started, working, on, this, over, a year, ago, um, knowing, that, there, was, a lot of, progress, being, made, and, commitment

from, ethereum, core, developers, to, move towards, um, the, words, the, merge, um you, know, for, for, us, obviously, we, didn't have, much, of, a, choice, but, to, look, at this, because, all, of, a, sudden, this, 90, of you, know, miners, who, are, running, our software, becomes, zero, um, and, then there's, this, entire, new, set, of stakeholders, uh, uh, node, operators, and and, solar, validators, who, you, know, don't have, software, to, run so, the, the, immediate, obvious, um, you, know answer, would, have, been, okay, well, let's just, port, the, software, that's, already working, right, and apply, it, over, to, uh, to, the, validators, um and, happy, days, we, still, have, this, like 10, line, patch, on, top, of, the, client, we

can, still, run, geth, everything, is, sort, of uh, running, the, same, way but, we, thought, we, could, do, better so, you, know, one, of, the, principles, that we, have is, to incrementally, improve, the, trust assumptions, of, the, systems, that, that we're, building, um, and uh, right, now, there's, sort, of, a, few properties, of, how, this, auction, works that, relies, on, trust miners, see, the, full, content, of, the payloads, that, they, receive, they, see, the full, content, of, the, bundles, and, so, they still, have, the, ability, to, front, run those, bundles, or, you, know, de-prioritize them, or you, know, center, them, completely, if, they so, wanted what, this, meant, is, that

you, couldn't, send, these, bundles, to, just anyone, right, this, would, be, like, a market-breaking, uh, uh flaw, in, the, system, where, no, one, would then, trust, the, privacy, and, and, and the, integrity, of, this, auction, and, they would, no, longer, participate, in, it, so there, was, a, scalability, limit, in, the number, of, entities, that, you, could, have participating, in, in, this, marketplace, on the, minor, side um, so, we, wanted, to, solve, this, we, wanted to, create, a, system, that, was, more permissionless, where, you, could, have, 100 of, the, validators, on, e2, participating, um and, the, way, to, do, that, is, to, uh, to, shift from, this, idea, of, having, bundles, to, the idea, of, having, full, block, proposals, and

introducing, this, role, of, a, block, builder there's, this, uh, there's, this, blog, post by, by, vitalik, on, each, research, uh introducing, the, concept, of, pbs, which which, is, achieving, exactly, this, it's achieving, separation, between, the, block proposer, and, the, block, builder in, such, a, way, that, the, block, proposer, no longer, needs, to, see, the, content, of, the block, that, they're, proposing, to, um, to the, network, they, only, need, to, make, sure that, they're, selecting, the, block, that has, the, highest, amount, of, value and, then, they, can, outsource, completely the, job, of, block, construction, to, these third, parties, block, builders, that, can themselves, you, know, be, more, centralized potentially and, they're, having, less, of, a, risk, for

for, the, integrity, of, the, chain, because all, of, the, validators, can, participate, uh equivalently so, this, is, sort, of, the, key, change, that um, that, we, aim, to, to, have, uh, with, with the, merge, and, it, took, a, a, while, to figure, out, what, was, a, design, that, was compatible, with, the, merge, pbs, as, a, whole the, idea, behind, it, is, to, have, a consensus, level, change, right, a, change that, would, require, an, upgrade, to, the, the ethereum, network, as, a, whole, modify, the four, choice, rule, in, a, way, that, sort, of embeds, this, uh, directly, into, the protocol, and, uh, we, knew, that, we, didn't want, to, delay, the, merge, any, more, than it's, already, been, delayed and, didn't, want, to, ship, any, of, these like, large, you, know, features at, the, protocol, level, before, the, merge

so, we, started, working, on, a, design, that could, sit, at, a, layer, above, consensus right, this, sort, of, marketplace, approach that, flashbots, has, but, with, some, of, the additional, properties, of, of, the, system um, so, this, is, called, methboost, um, and yeah, it's, it's, you, know, in, the, final stages, of, testing, now, with, uh, node operators, um, we, have, uh, this, this landing, page, called, boost.flashbots.net uh, where, you, can, keep, track, of, of, the progress, on, on, um, on, adoption of, that, software, um, and, yeah, it's promising, to, bring, a, lot, of, of, of, neat benefits, to, um, to, ethereum, and, so, this is, a, really, a, product, for

validators, for, people, that, plan, on staking, their, eth, and, running, a, node this, is, a, solution, for, them, and we, can, go, and, we're, and, we, probably, will go, into, the, details, about, like, how, uh mav, boost, you, know, preserves, the decentralization, ethereum, or, we've already, alluded, to, it, a, lot, but, like, you can, kind, of, take, it, on, faith, when, the function, when, the, mechanism, is, that validators, are, presented, with, an, array of, blocks, like, uh, like, a, little, mr, menu comes, up, and, says, here, here, are, your available, blocks, sir, or, ma'am, and, then you, can, say, like, i, picked, the, one, that gives, me, the, most, money, uh, and, you'll pick, that, one, because, you're, rationally incentivized, too, and, you'll, pick, the, one that that, pay, has, the, biggest, mev, like tip, that's, associated, with, it, and, you can, just, take, it, on, faith, that, that, is

going, to, be, the, thing, that, preserves, the decentralized, decentralization, of ethereum, the, most, because, you're capturing, the, most, value, the, the, values being, captured, by, the, ether, stakers, and not, who, is, ever, like, bundling, up, all, the transactions, doing, all, the, mev, and because, of, the, by, nature, of, like, all, the other, ones, are, paying, you, less, you, pick the, one, that's, paying, you, the, most, so you, know, that, you, are, pulling, the, most money, off, of, the, table, and, leaving, the lease, amount, on, the, table, for, jump capital, uh, and, so, it, goes, to, the individual, staker, who, we, hope, is, you know, decentralized, network, of, stakers rather, than a, much, more, um professionalized, like, block, builder, or expert, block, builder, that, is, like, an activity, that, i, have, no, idea, how, to, do or, how, to, engage, in, and, neither, will

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now, you're, taking, a, similar, model, i think, and, you're, saying, in, the, proof, of stake, world, post, merge, we've, created some, additional, code, that, can, be, added to, an, eth, validator, client, and, we're calling, that, mev, boost, or, mev, boost that's, where, we, get, the, mev, part, and, uh i, i, would, assume individual client, teams, you, know, we, have, like, you know, prism, and, nimbus, all, these, teams, do they, have, to, adopt, it, are, they, deciding to, adopt, it, or, are, the, individual, um like, validators, or, validating, pools, you know, like, all, of, the, validators, in, the lido, network, are, they, having, to, adopt v, boost, what, does, the, mev, boost, adoption path, depend, on

all, of, this, all, of, the, above, um so, so, this, is, one, of, the, challenges, with developing, these, uh, these, pieces, of software, is, there's, so, many, different stakeholders, that, you, want, to, work, with and, get, their, input, into, development process, so, it's, sort, of, a, fully, open source, approach, collaborating, with everyone, from, ef, research, team core, developers, of, all, these, different clients, node, operators, everyone, from, you know, the, the, more, distributed decentralized, ones, to, the, you, know, the fully, custodial centralized, one creating, a, piece, of, software, that, meets all, of, their, their, their, diverse requirements, um, and, that, they, are, all sort, of, on, track, for, integrating, um, you know, a, lot, of, cat, hurting, right, um, but

um, but, yeah, so, so, at, the, core, rate, what this, the, software, aims, to, do, that's somewhat, different, from, um, from, mevgath is, uh, aligned, with, the, the, objective that, the, the, ethereum, core, dev developers, had, with, um, with, shipping clients, for, for, the, merge, so, protecting client, diversity, was, super, important, um you, know, as, we, all, know, the, majority, of nodes, on, ethereum, today, are, uh, are, geth nodes, right, go, ethereum, nodes, and, that creates, some, some, some, risk, because, if there's, a, you, know, a, consensus, uh issue within, the, um, the, ethereum, client, this all, of a, sudden, sort, of, becomes, a canonical the, canonical, chain

and, requires, some, some, social coordination, to, recover, from, so, um, in, an effort, to, avoid, this, the, goal, with, proof of, stake, ethereum, is, to, have, a, wider diversity, of, of, clients what, this, means, for, us, is, we, shift, away from, just, having, a, single, patch, on, top of, a, client, to, now, wanting, to, build, a sidecar, right, an, individual, piece, of software, that, can, plug, into, any, of, the consensus, client, using, a, standard, api, um so, there's, this, thing, called, the we're, getting, into, the, weeds, here, but the, ethereum, builder, api, right, which, is a, standard, specification, that, all, the different, client, development, teams, have implemented, um, and, and, uh, the, mevu software, plugs, into, this, uh, protects, the

the, the, client, diversity, of, um well, it's, okay, so this, is, pretty, cool, but, it's, like, but like, your, pitch, to, all, of, these different, stakeholders, is, um, i, don't know, it, seems, like, a, good, pitch, it's just, like, add, this, code and, you, get, more, money right, whether, you're, a, validator, pool operator, i, guess, maybe, the, client, teams have, to, do, some, extra, work, but, they probably, want, their, client, to, be, able, to get, their, validators, who, use, it, more money, so, the, pitch, seems, like, it, would be as, adopted, as, as, mev, geth, was, like how, long, do, you, think, it'll, take, to, get to, you basically, everyone, is, is, using, mev, boost does, that, happen, from, day, one, or, will, it take, some, time

yeah, our, goal, is, to, target, everyone having, that, as, soon, as, a, marriage arrives, um, and you, know, it's, it's, mostly, a, question, of the, node, operators, at, this, time how, comfortable, they, are, in, their deployments and, when, they, have, done, so, the background, wrote, work, to, be, able, to, um to, expose, um, you, know, immediate, rewards to, their, to, their, stakers, um but, uh, you, know, all, the, interfaces within, the, the, ethereum, clients, are implemented, uh, med, boost, itself, is, is feature, complete, um, and, uh, and, now, it's at, the, stage, of, of, testing, uh, in, uh, test net, you, know, environments, with, uh, with

node, operators, so, this, is, gonna, be, cool and, guys, i, just, want, to, remind, bankless listeners, this, kicks, in, right, after merge, the, same, so, much, so, much, is happening, at, the, merge, right, proof, of work, gets, it, gets, turned, off, new, blocks and, improve, a, stake, um, you, know, start producing, an, mev, boost, will, be, in, play too, and, i'm, curious, to, find, um, what, kind of, difference, might, be, might, we, see, in the, um, the, ap, apy, uh, for, for, staking right, so, like, let's, say, i, don't, know it's, four, percent, what, is, it, right, now staking, uh, ap, why, point, two, four, four percent, something, like, that, four, point two, percent, um, that's, without, mev, boost and, that's, without, staking, do, you, have any, numbers, on, what, it, would, look, like with, mev, boost, turned, on

yeah, a, couple, things, i want, to, touch, on so, so, one, of, the, things, you, brought, up is, you, know, it's, cool, that, this, is, ready right, at, the, merge the, the, real, answer, is, like, we, don't have, a, choice, but, for, it, to, be, ready, at the, merge, because, mev, will, keep happening, yeah, you, know, whether, it's, on proof, of, work, or, proof, of, stake, anybody will, stay, there, right, and, it'll, keep happening, and, what, happens, if, you, don't have, like, an, efficient, block, space market, for, mev, uh, after, the, merge, is, you go, back, to, the, way, that, ethereum, was during, like, summer, 2020, which, is, like, a lot, of, spam, a, lot, of, gas, wars, and everyone, ends, up, paying, more, for, for inclusion, and, getting, like, a, degraded experience, um, so, in, order, to, mitigate that, you, want, to, have, these, like

efficient, marketplaces, in, place, as, as quickly, as, possible, so, that's, why, like immediately, after um, and, yes, in, terms, of, you, know, how, much reward, this, this, provides, uh, validators well, as, we, all, know, right, issuances, of eth, after, the, merge, goes, down, a, lot, um and, so, a, lot, of, the, value, that miners, have, been, collecting, up, to, date has, been, this, two, eighth, block, reward every, block, this, goes, away, um, and, now you, know mev, becomes, a, much, larger, piece, of, the total, reward, that, that, validators receive, we, have, some, numbers, that, are analysis, from, last, summer, right completely, outdated, there's, a lot, of things, that, happened, since, then, first, of

all, the, market, you, know, went, crazy, and then, died, down, a, little, bit, um, also, yeah p1559, came, out, and, sort, of, modified, a lot, of, these, numbers, but, anyways, the, the metric, back, then, was, around, sixty percent, of, the, rewards, uh, validators, is going, to, come, from, um, from, mev, we're working, on, outdated, numbers, so, please caveat, this, it'll, be, potentially, lower than, than, this but, still, some, significant, amount, of value, that, that, can't, um, that, can't really, be, ignored, by, validators, okay give, us, that, number, again, those, numbers again, sorry, i, missed, it it, was, 60, was, the, initial, analysis 60, of, the, total, reward, would, be, mev so, we're, talking, at, least, a, few

percentage, points, few, hundred, bips, on top, of, like, you, know, if, staking, is, four point, two, percent and, actually, thinking, is, four, point, two percent, reward, right, now, right, you'd look, at, ten, percent, apy, total, wow wow, yes, right, ten, percent, of, like, sixty percent, of, total, right and, that's, what, he, said, so, that, would, be six, percent if, total, is, ten wow um and, that, could, change, of, course, given like, market, conditions, and, mev, potential but, it's, like, that's, a, big, reason, to, go get, mev, boost, i'm, not, worried, about, your adoption, sir, i, think, it's, gonna, be, fine i, think, everyone's, gonna, want, this, um i, i, i, guess, there, are, so, many, different you, know, side, quests, we, could, do, on, this like

one, part, of, me, wants, to, ask, on, a, side quest, by, the, way, are, there, going, to, be any, big, mev, issues, when, proof, of, work, is was, turned, off, and, we, migrate, to, proof of, stake, like, what's, going, to, happen there, during, that, kind, of, during, that gap but, but, another, question, i, have, before we, get, there, is, maybe, like, um why, are, you, guys, doing, this, why, is flashbots, doing, this, like, do, you, guys have, a, token, you, know, you're, trying, to pitch, or, something, like, are, you it, called, an, organization, at, the beginning, are, you, kind, of, a, commercial enterprise, you're, here, to, make, money, are you, like, a, non-profit, trying, to, make, the world, a, better, place, because, this, is definitely, a, public, good, but, how, do, you fund, yourselves, and, what's, kind, of, the what's, in, it, for flashbots, okay, what, do, you, want, to

tackle, first let's, do, the, second, one, i, want, to, hear about, the, incentives, of, flashbots, as, an org okay, yeah, so, so, flashbus, is, uh, sort, of emerged, from, from, a, telegram, group, of researchers, really and, what, we, realized, very, early, on, was if, this, is, a, very, difficult, problem, and if, we, want, to, attract, the, best, talent, to solve, it, we, can't, really, structure, it, as just, a, non-profit, entity so, we, did, uh, uh, raise, some, money, from, um from, investors, that, are, that, are, highly aligned, with, uh, with, ethereum, so, you know, one, of, our, biggest, backers, is, is, is paradigm, and, and, the, reason, why, we wanted, to, to, partner, with, them, to, fund the, organization, was, around

their, heavy, focus, on, on, on, research, and so, their, proven, research, output, um, so, we are, structured, as, a, for-profit, entity but, very, deeply, ingrained, into, the, sort of, culture, of, our, organization, is commitment, to, the, principles, that, we've laid, out, um, in, our, initial, foundation, so we, have, sort, of, a, a, public, record, of, of these, these, commitments, that, we, have towards, a, community, and, really, that, is that, is, our, north, star, um, we, don't, have any, sort, of, monetization, method, right now, or, plans, to, have, monetization methods anywhere, in, the, future at, some, point, in, the, future, yes, but, not in, the, immediate, future and, the, reason, why, is, we, don't, feel, that mev, has, been, solved, as, a, problem, yet

we, sort, of, have, confidence, that, if, we are, able, to build, solutions, that, actually, help achieve, the, principles, that, we've, laid out, there, will, be, some, way, somewhere, in here, for, us, to, to, monetize, um, and, really the, the, main, thing, that, we, have, to, do, is is commit, to, those, principles, and, follow through, with, them um, and, yeah, that's, the, way, we've, been operating, so, far so, in, in, the, future, with, pbs, proposer builder, separation, this, this, will, go from uh, you, know, uh, which, is, it's, more, or less, what, mev, boost, is, now, but, except, in its, current, say, mev, boost, is, kind, of like, the, side, car, to, a, bunch, of, ethereum clients, in, the, future, we'll, have, an, eip we'll, have, a, hard, fork, to, ethereum, that

will, actually, enshrine, the, same, role into, the, protocol, and, it'll, be, called proposer, builder, separation but, once, once, the, service, of, flashbots becomes, a, part, of, the, actual, core ethereum, protocol what, is, what's, the, role, of, flashbots beyond, that, like does, flashbot, sunset, or, how, do, you, guys have, a, company, once, your, guy's, a, service actually, just, becomes, a, part, of, the ethereum, protocol so, pbs, is, a, small, part, of, the, mev solution, it's, sort, of, you, know, the the, answer, there, um, i'll, link, us, back, to the, mev, supply, chain, question, um, the immediacy, supply, chain, is, actually multi-dimensional, so, not, only, do, you have, a, supply, chain, on, a, single

blockchain, but, you, have, a, supply, chain on, every, single, other, blockchain, as, well and, pbs, really, only, targets, the relationship, between, builders, and validators, it, doesn't, say, anything, about the, relationship, between, users, wallets wallets, searchers, searchers, block builders those, are, all, sort, of, solved, by, other by, other solutions, so, while, like, pbs, is is, hugely, beneficial, to, the decentralization, of, the, system, on, the, um on, the at, the, protocol, level, right, and maintaining, validator, decentralization the, focus, then, becomes, how, do, you, enable decentralization, at, other, layers, of, the stack, how, do, you, enable, block, builder decentralization, as, a, whole, how, do, you

solve problems, like, cross, domain, mev, cross chain, mev, how, do, you, solve, the, problem of, exclusive, order, flow, these, are, all other, sort, of, mev, problems, that, uh, that remain, unsolved, even, in, a, uh, pbs world we've, uh, used, this, this, model, uh, on bankless, a, number, of, times, before, called moloch, uh, this, this, god, of, coordination failure, and, you, know, moloch, is, something that, you, fight, but, you, can, never, really finally, slay, like, he, never, he, never, goes away, he, just, emerges, in, a, different place, and, so, is, is, your, answer, staphon that, you, know, flashbots, focused, on, mev boost, right, now, and, once, it, gets enshrined, in, the, protocol, that, part, of like, uh, centralization, that

centralization, vector kind, of, actually, does, go, away, but, then there's, like, other, pockets, that, uh, mev boost, will, like, hop, around, to, try, and wherever, there's, a, vertical, integration like, a, uh, capture, wherever, there's, like a, centralization, vector, flashbots, will come, in, and, figure, out, some, mechanism, to make, that, more, into, a, competitive marketplace, and, then, i'll, solve, that problem, then, it'll, go, on, to, the, next, one the, next highly, vertically, vertically, integrated uh, centralization, vector, and, then flashbox, will, go, there, and, try, to, make, a marketplace, out, of, that, and, then, move, on is, that, that's, kind, of, the, idea yeah, exactly, um, and, i, think, a, lot, of these, solutions, will, sort, of, converge right, um, i, think, i, don't, think, that, it is, an, infinite, problem, space, i, think

it's, a, very, vast, problem, space, right like, when, we, think, on, the, research, side of, the, organization, about, a, research roadmap, we, think, on, like, the, 20-year, you know, maybe, even, 50-year, horizon, like there's, just, some, fundamental, computer science, and, cryptography, problems, that uh, that, need, to, be, solved, if, if, we're going, to, solve, the, the, mev, problem, like at, the, fundamental, level and, a, lot, of, these, solutions, that, we're looking, at, now, are, are, you, know short-term, patches, that, move, us, towards this, this, ultimate, uh, solution, what's super, interesting, as, well, about, this model, is, is, effectively, you, guys, are like, ethereum, core, devs, now, i, guess, if that's, what, that, means, and, what's, super interesting, about, this, model, is, um, this is, private, sector, developing, an

important, enough, feature, and, and, um, yeah feature, set, that, eventually, public sector, the, ethereum, protocol, itself, says oh, i, want, that, please, we, need, this, let's embed, it, deeper, in, the, protocol and, your, work, becomes, embedded, and enshrined, in, the, ethereum, protocol therefore, making, you, staphon, an, ethereum core, dev, i, guess i, guess, that's, how, it, works, and, uh that's, very, fascinating, to, me, can, you tell, us, a, little, bit, more, about pbs, itself as, it's, enshrined, in, the, ethereum protocol, like, how, far, away, is, that and, like, how, much, do, we, actually, need, it it, seems, like, mev, boost, can, like, do, a pretty, good, job, of, it, so, maybe, it's, not

that, urgent, or, you, tell, us, when, is, it coming, how, urgent, is, pbs, getting, that enshrined, in, the, protocol, layer yeah, so, it's, you, know, notoriously difficult, to, predict, uh, you, know consensus, level, changes, um, on, ethereum, i will, say, you, know, pbs, is, still, at, the research, phase, um, there's, a, lot, of, ideas for, how, how, it, can, work, but, it, also, is intermingled, with, a, lot, of, other, items inside, of, the, ethereum, roadmap, um, right so, um, so it, has, across, dependencies, uh, on, several other, things, and, as, we, learn, more, about how, meth, boost, performs, um, and, yeah, how it, gets, used, it, will, also, help, inform how, to, design, uh, pbs, so, a, timeline, is, is

you, know impossible, to, give, but, it, won't, be, in the, next, year, or, two, as, my, uh, is, my, uh very, conservative, uh, estimate, um, so we'll, have, some, some, some, period, where you, know, we, expect, the, ecosystem, to evolve, on, top, of, meth, boost you, know sort, of, stress, test, it, figure, out, how, it needs, to, be, improved, how, it, needs, to, be changed, and, then, i, expect, iteratively we'll, move, more, towards, an, enshrined, a system, from, there, and, our, like, metboost kind, of, gets, us, what, we, need, right, like we, don't, really, need, this, pbs, feature in, order, to, protect, us, against decentralization, at, that, level we, do, still, need, it, um, so, mev, boost, gets

us, part, of, the, way, there, the, problem, is that, it sprinkles, a, little, bit, of, trust, uh special, sauce, onto, the, system, to, be, able to, work so, while, it, achieves, the decentralization, on, the, validator, side it, introduces these, relayers which are, sort, of, delegates, of, validators, but these, relayers, still, have, access, to, the information so, they, are, sort, of, receiving, blocks from, block, builders, they, are, holding, on to, them, and, then, they, are, like submitting, them, to, validators, uh, for, for inclusion, um, this, realer, role, is, the, one that that full, pbs, or, and, trying, pbs, gets, rid, of

um, so, it's, it's, important, for, uh improving, the, trust, guarantees, of, this system, but, uh, the, system, works, even, uh even, uh, with, those, in, place, yeah, how, how worried, should, we, be, about, that, relay relayer, role, um, i, guess, from, a, from, a practical, perspective, um, is, that, a, large centralization, vector, vector, i'm, i'm really, not sure, how, to, think, about, the, relayer, role right, now, i, guess, i, haven't, given, that rule, too, much, thought, so, the, main, um, the main, concern, with, regards, to, uh, block builders, or, or, relayers, is, really, one, of of, censorship, right, so, if, you, have, um, a single, entity, that's, sort, of, accepting these, these, transactions, and, holding, on

to, them before, submitting, them, on, to, to validators, they, have, sort, of, the opportunity, to, perform, censorship, over those, transactions so, if, you, look, at, the, the, pbs, roadmap, it gets, rid, of, these, roles, and, it introduces some, mechanisms, to, help, protect, against against, censorship, which, is, something called, cr, list and and, those, like, help, mitigate, this, this specific, issue, one, thing, that's, worth noting, is, like, while uh, relayers, have, the, ability, to, uh, to perform, censorship, they, don't, have, the um, the, incentive, to, do, so, and, they, still incur, a, cost, to, perform, censorship, right so, it, means, that, all, the, blocks, that

end, up, being, produced, either, from, the block, builder, or, the, relayer, is, going, to be, less, valuable, which, means, some, other relay, or, some, other, builder, can, come, in and, produce more, more, valuable, competitive, blocks, um so, so, really, the, the, censorship, piece, is is, the, piece, that's, um, that's, most, uh crucial, to, solve, uh, in, in, the, entire, pbs yeah, it's, interesting, to, think, about this, way, it's, like, any mev, boost, as, a, whole, is, is, kind, of, like you, know, plus, 10, points, let's, say, to, the to, the, character, stats of, ethereum, for, mev, resistance, which, is a, great, thing, but, it's, also, maybe, like, a minus, one, point, or, minus, two, points, from a, censorship, resistance, perspective maybe, that's, the, case, and, then, pbs, kind

of, plugs, that, hole uh, so, you, know, we, get, back, to, the, the censorship, resistance, that, um, that, we want, to, have, from, the, ethereum, system okay, just, a, quick, branch, down the, other, rabbit, hole, so, i, think, we've described, past, present and, future, for, mev, and, flashbots, as, it emerges, from, first, mev, geth, that's, what flashbots, is, doing, today, in, the, proof, of work, uh, mining, a, world, but, that, that that, world, is, is, fast, fading, and hopefully, maybe, september, october, uh, we will, have, the, next, stage, which, is, mev boost, and, so, we've, got, this, this marketplace, for, proposers, and, and builders, kind, of, achieving, a, similar objective, of, creating, a, marketplace, for for, mev

separating, these, concerns, and, then eventually, years, later, potentially, we get, this, technology, enshrined, in, the protocol, as, a, protocol, builder separation, so, this, is, enshrined, pbs, but um, there's, this, other, thing, that's happening, of, course, with, with, the, merge and, i'm, curious, it, it, seems, to, be, the case, that, there's, going, to, be, a, lot, of mev, type, of, opportunities, maybe, stuck, on the, proof, of, work, chain in, this, transition, to, proof, of, stake, at least, i've, i've, heard, big, brain, mev folks, talk, about, it, in, this, way, and, i'm curious, if, um, yeah, what, would, you, say about, this at, merge, time, at, merge, o'clock, are, there going, to, be, some, like, weird mev, things, at, play, and, what, do, you expect, to, see

so i, don't, know exactly, what, will, happen, i, know, there'll be, a, lot, of, chaos i, know, that, a, lot, of, very, smart operators, have, been, thinking, about, this for, a, long, time, and, like, building strategies, because, there, will, be, a, lot of, like, one-off, opportunities, one-off arbitrage, one-off, you, know um, things, that, can, be, done um, between, the, the, the, two, chain, let's say, that, the, proof, of, word, chain continues, to, march, on, uh, or, whatever, so there's, going, to, be, some a, little, bit, of, mvv, chaos, that's, that's uh, pretty, much, uh, for, granted, um, i, don't think, it's, anything, that's, going, to compromise, the, stability, of, the, system

or, like, compromise, the, merge, from, from happening but, it, will, mean, that, you, know, about operators, who, are, prepared, to, capture, it will, will, make, a, little, bit, of, money, um at, that, time, um, no, the, the, alpha, is knowing, exactly, what, those, strategies are, and, i, don't, have, that, i, don't, have that i've, uh, i've, described, uh, the block, one, of, the, proof-of-work, fork chain, as, that, one, incident, in, san, diego a, few, years, ago, where, they, were, doing, a firework, show, but, because, of, a, computer malfunction, all, seven, thousand, fireworks all, got, lit, off, at, once, rather, than rather, than, orderly, orderly, and, normal like, distribution, of, fireworks, anyways um stefan, there's, a, few, like happy by-products, of, mev, boost, that, i'd, like

to, go, into, there's, some, things, that, it enables, that, it, didn't, it, doesn't, intend to, enable, but, it, happens, to, just, bring along, with, it, things, like, account abstraction, maybe, there, are, others, could you, walk, us, through, uh, just, some, of, the extra, cool, stuff, that, comes, along, with mev, boost yeah, so, um, you, know, one, of, the, things that's, always, been, sort, of, a, limitation of of uh, app, developers, on, top, of, ethereum, is the abstraction, of, a, transaction, you've always, had, to, encode, whatever, you, do into, a, transaction, that, you, then, send over, to, the, network, for, inclusion and, you, know, the, reason, why, that's, been a, particularly, difficult, abstraction, to break, is, because, a, transaction, has, these properties, around

around, dos, protection right, that, um, you, need, to, have, a, fee payment, embedded, into, the, transaction and, it, reverts, on, chain, and, like, you have, all, these, things, that, like, require you, to, pay, for, it, using, eth, um this, is, all, sort, of, becomes, um, uh a, thing, of, the, past, when, when, we, start to, look, at, uh, at, uh, at, mev, boost, because block, builders, can, start, introducing, uh any, sort, of, uh, abstraction, that, they want on, top, of, their, block, building algorithms, they, can, start, to, say, you know, if, you, have, a, smart, contract, on chain, that, accepts, signed, messages, you can

actually, issue, a, transaction, by, just signing, like, an, arbitrary, piece, of, text um, and, you, can, pay, for, it, using, dye, or usdc, or, like, any, other, stable, coins, and then, behind, the, scenes, it, sort, of converts, that, into, um, and, to, eat, and then, uses, the, east, to, pay, the, the, base fee and and, pay, for, the, inclusion, by, the, way, we did, an, entire, episode, on, this, with, matt from, block, native, called, ethereum's hidden, power, structures, and, we, spent, a little, bit, of, time, speculating who, this, new, builder, class, would, look like because, so, uh, again in, proposer, builder, separate, separation right, the, proposal, proposer, that, is, kind of, the, the, at-home, uh, validator

individual, running, an, eth, node, like, very easy, job, kind, of, you're, just, running your, eth, node but, the, builder, requires, some, additional skill, and, it's, probably, going, to, be commercialized, it's, probably, going, to, be a, set, of, organizations, or, companies, or entities, doing, this, do, you, have, any speculation, on, what, this, builder, market might, look, like, uh, staphon it's very, difficult, to, predict, um, you, know there, you, can analyze, any, market, using, using, some first, principles, right, like, building right, now, is, like, a, blue, ocean, like there's, no, one, doing, it, so, probably what's, gonna, happen, is, there'll, be, some some, players, that, are, like, newcomers, and they'll, they'll, have, a, first, mover advantage, then, there'll, be, like, an

explosion, of, competition, because ultimately, block, building, is, meant, to, be like, a, competitive, landscape, um, and, then a, lot, of, innovation, is, going, to, happen, a lot, a, lot, of, innovation, so, we'll, start with, a, few, builders, then, a, lot, of builders, then, most, of, the, innovation, is going, to, have, taken, place, and, then, we'll see, some, concentration, again back, into fewer, builders, ultimately, it's, likely that, you, know, the, marketplace, is, going to, have, some, kind, of, power, law distribution, where, the, top, builders aggregate, the, majority, of, the, proposal power but, one, of, the, the, things, that, we, want to, optimize, for, is, to, keep, this distribution, as, flat, as, possible, right so, what, flashbots, is, going, to, be, looking at, as, this, this, builder, market, evolves

is, what, are, the, sources, of, advantage, and what, are, the, like, the, key, innovations that, some, of, the, block, builders, are, um are, introducing, to, the, marketplace, and how, can, those, be, commoditized, so, that they, uh, sort, of, remain, accessible, to, all the the, other, block, builders, um that, will, be, sort, of, a, fascinating journey, that, i, think, the, ethereum ecosystem, is, going, to, engage, on, over, the next, few, years is, there, a, risk, of, over, centralization in, the, builder, space yeah, i, mean, certainly, there, is, um certainly, there, is, i, mean, implicit, into the, um, the, design, of, pbs, is, saying, okay mev, is, a, centralizing, force, but, we, would rather, the, centralization, happen, at, the builder, level, than, at, the, validator level, the, cost, of, that, is, the, risk, of

censorship um we, as, flashbacks, believe, that, like, ex you, know, builder, centralization, is, not necessarily an, acceptable, outcome, and, we, want, to, go one, step, further, and, actually, achieve a, builder, decentralization because, we, think, that, even, if, it's, just an, economic, advantage, that, you, have, a single, builder, or, maybe, a, handful, of builders, five, builders, you, still, have, a better, system, if if, you, have, a, larger, number, and, if they're, all, um, commoditized beautiful, um we, were, going, through, some, of, the, happy byproducts, of, uh, mav, boost, and, we, went down, the, account, abstraction, rabbit, hole uh, are, there, any, other, happy, by bi-products, as, well um

yeah, i, mentioned, i, mentioned cancellations, i, mentioned um you, know, rescuing, white, hat, sort, of fund, rescuing um i, think uh, mitigation, of, of, mev, is, going, to, be one, that, uh, that, we'll, see, and, hear, more and, more, about block, builders, that, have, various features, that, help, protocol, developers or, application, developers, um, mitigate, uh and, and, sort, of, reduce, the, amount, of, mev that, they, expose um yeah, it's, difficult, to, predict, exactly which, direction, that, things, are, going, to take, but but, those, are, our, early, explorations, i

think, we'll, see well, stefan, to, kind, of, wrap, it, up, here you, alluded, to, the, theme, of, mev, day, at devconnect, in, amsterdam, and, it, was, very much good, versus, evil, light, versus, dark dystopia, versus, utopia, and, these, are these, are, just, framings, that, i, really appreciate, because, they, they, understand crypto, and, what, we're, really, doing, here as this, multi-decade-long, fight, against, the evils, of, centralization, not, all centralization, is, evil, but, systemic centralization, certainly, tends, towards that, uh, and, so, putting, it, into, people's brains, that, there, is, a, lot, at, stake, here is, a, framing, that, um, i, think, we, could lean, into, a, little, bit, more, here, in, the crypto, space, so from, your, perspective, you're, you, have

some, of, the, the, one, of the, best, vantage points, in, all, of, crypto, is, to, like, the centralization, risk, of, our, base, layer protocols, uh, and, so, if, we, were, a, needle uh, going, between, light, and, dark, like, how optimistic, are, you, that, we, are, able, to push, this, needle, into, the, light as, we, go, forward, to, our, protocols um i, think, the, future, is, bright, you, always have, to, maintain, an, optimistic, view, over the, future, i, think, that, we, are, going, to see, a, lot, more, centralizing, forces, and we, are, going, to, see, more, scary, things take, place ultimately, though, the, only, thing, that matters, is, like, a, commitment, of, the community, of, the, builders, and, the, ethos of, caring, about, decentralization, to, to survive, uh, for, solutions, to, keep

innovating, and, being, brought, forward, um and, i, think, that, spirit, is, still, holding out, like, extremely, strong it's, what, we, tried, to, to, perpetuate, and as, long, as, that, that, spirit, exists, there is, there, is, a, huge, amount, of, hope so, i'm, feeling, very, optimistic, about, it well, stefan, thank, you, so, much, for, for joining, us, this, has, been, a, fantastic episode, i, know, it, was, our, gold, even myself, and, for, the, bankless, nation, to learn, a, little, bit, more, about, mev, boost and, what, is, happening, post, merge, and also, how, that, affects, the, ethereum protocol, in, pbs, i, think, we, accomplished that, today, uh, thank, you, for, all, the, work you're, doing, this, is, a, public, good, for ethereum, for, crypto, and, ultimately, for the, world, and, we, appreciate, it yeah, thank, you, thank, you, so, much, for, uh

for, helping, educate, and, get, the, word, out about, it absolutely, and, uh, stefan, is, there anything, listeners, can, do, to, find, out, a bit, more, about, flashbots, and, how, to, get involved yeah, so, for, macboos, specifically, um keeping, track, of, the, progress, there boost.flashbots.net and, then we we, are, kind, of, uh, difficult, to, keep track, of, because, uh, we, don't, uh necessarily, have, a, lot, of, websites, or our, twitter, activity, uh, but, we, have, a website, uh, a, writings, website, where, we we, publish, blog, posts, called writings.flashbots.net um, and, uh, yeah, i, recommend, checking, out both, those, those, resources, to, learn, more

bangla, station, we'll, include, a, link, to those, in, the, show, notes, boost, off flashbots.net, and, writing, dot writing.flashbots.net also, second, action, item, for, you, once you're, done, looking, at, what, flashbots, is doing, these, days, listen, to, our, sister episodes, if, you, haven't, already, the first, is, a, guide, to, the, ethereum, roadmap where, david, goes, through, the, entire ethereum, roadmap, and, talks, a, little, bit about, mev, and, pbs and, also, the, episode, i, mentioned, earlier today, which, is, ethereum's, hidden, power structure, where, we, go, into, detail, in this, new, role, this, block, builder, role how, that's, going, to, affect, the, economics and, power, structures, in, ethereum, so we've, got, some, homework, for, you, there and, as, always, gotta, end, with, this, crypto is, risky, you, could, lose, what, you, put, in

but, we, are, headed, west, this, is, the frontier, it's, not, for, everyone, but, we're glad, you're, with, us, on, the, bankless journey, thanks, a, lot hey, we, hope, you, enjoyed, the, video, if, you did, head, over, to, bankless, hq, right, now to, develop, your, crypto, investing, skills and, learn, how, to, free, yourself, from banks, and, gain, your, financial independence, we, recommend, joining, our daily, newsletter, podcast, and, community as, a, bankless, premium, subscriber, to, get the, most, out, of, your, bankless, experience you'll, get, access, to, our, market, analysis our, alpha, leaks, and, exclusive, content and, even, the, bankless, token, for, airdrops raffles, and, unlocks, if, you're, interested in, crypto, the, bankless, community, is where, you, want, to, be, click, the, link, in the, description, to, become, a, bankless

premium, subscriber, today, also, don't forget, to, subscribe, to, the, channel, for in-depth, interviews, with, industry leaders, ask, me, anythings, and, weekly rollups, where, we, summarize, the, week, in crypto, and, other, fantastic, content thanks, everyone, for, watching, and, being on, the, journey, as, we, build, out, the bankless, nation