Block Building and the MEV Supply Chain w/ Kubi Mensah (Titan Builder)

Transcript

[Music] hello and welcome back to the strange waterer podcast thank you for joining us for another conversation in the beginning vitalic said let there be eth and there was ethereum and we all saw that ethereum was good or at least we all believed that one day ethereum could be good for the ethereum that was born in 2015 had many problems some quite obvious and others far more subtle and Sinister perhaps the most important

example of one of these day Zero imperfections existed quietly outside of until November 2020 when Stefan Goslin dropped one of the most impactful eth Research Forum post flash Bots front running the me crisis along with so much research that came before and after this post set off a crisis in the ethereum community where we first confronted the existence of the Dark Forest and that ended up drastically transforming the ethereum road map and the endgame of the world computer as an aside you should search

ethereum is a dark Forest Paradigm for even earlier canonical research but here's the hypercondensed version before flash Bots ethereum transactions were prayed upon by highly sophisticated actors capable of manipulating financial markets and flows to extract value from users flash Bots design designed a system to introduce competition channeling this extracted value away from the Predators and towards the ethereum network participants which are the e stakers or validators this solution has created a complex system made up of many different actors including block Builders me

Searchers block relays Network validators and more and yet this added complexity has enough benefit that it has been weaved into the core ethereum road map here in 2024 we sit in this incredibly unique moment of transition the moment before the Dark Forest feels safe and warm but with enough pieces in place so that we can understand how we get there and today we have the perfect guess to help us not only understand what the landscape looks like today but how it is changing and what it might look like in its end

State Kuby Mena is a co-founder of gataka the company behind Titan Builder Titan Builder is one of the core players at one of the most critical points of the meev supply chain responsible for building close to onethird of all ethereum blocks this conversation is a rare look into one of the more op layers of the crypto stock including a deep dive into what the me supply chain looks like a discussion of just how relevant the risks of the inclusion delay and even Concepts like validator proposer separation again this conversation is a

treat and I hope you enjoy it as much as I did one more thing before we begin please do not take Financial advice from this or any podcast ethereum will change the world one day but you can easily lose all of your money between now and then okay ladies and gentlemen Kuby Mena kooby thank you so much for joining us on the strange waterer podcast yeah sure thing great to be here of course man so um before we like kind of really get into it and and I'm so excited to like walk through the me supply chain um

I'm a huge believer that the most important part of every conversation with the people in it so uh real briefly could you just walk us through like who are you how did you find crypto and then I guess ultimately what led you to um the the block building side yeah sure uh so hey I'm Kuby a co-founder at gataka so gataka is the company that is behind uh the Titan block Builder and recently also the Titan relay um my personal background is software engineering cyber security uh so software engineer at heart um built a cyber security startup uh before getting into crypto um so that was my first venture out of uni um but then uh I guess as my previous company

got Acquired and I worked for the company that acquired was I had a lot more time on my hands and I started dabbling um and just because of my cyber security background I've always heard about like crypto and specifically Bitcoin back in the day from afar and you know the concepts of like encryption hashing public Keys private Keys like all kind of made sense to me but like really putting all these Concepts together to create this like you know this ecosystem or this new Machinery that allows us to exchange value was fascinating um yeah so I had more time on my hands and basically started just dabling which meant trading and buying some stuff and looking into different

kinds of projects and that basically got me down to RIT hole of crypto awesome and my understanding just from like learning a little bit more about you is that um part of like what really got you into me and like the competitive games was that you were uh like building applications and scripts and whatever for like games of probability that weren't necessarily related to crypto and I would just love to hear a little bit about how that journey of basically like me in a non-me world like LED you to realizing that these same skills and same ideas like are going to be critical enough that you can build like what I hope what we both think is going to be one of the most important um companies

in like the the future Financial system yeah um so I I basically as a kid I've always been just doing like site projects and writing some code and just exploring different things that I find interesting and I found it fascinating that you could basically write some piece of software like at home in front of your com computer and just generate income and um so one of my good friends uh from uni who's actually also one of my co-founders from the previous company and is part of the current company as well so we we've been working for for like decades together um but um we essentially embarked on like one of the site projects which was writing uh a bot

for like um as you mentioned probalistic skill games on the internet um that involve probability and so um that involves just like conceptually architecturing software in a certain way like hovering sort of the signal generation process the you know generating them the action based on the signal and then automating in uh up time and all of those kind of things so it's kind of the same Concepts that most trading system follow and when we then first got into crypted and did some manual buying here and there and exploring different kinds of assets um it was quite apparent very early on that um there are lots of Arbitrage

opportunities so you know you could literally do them manually so why not automate this and you know we sort of followed the same principles and that just ended up like evolving more and more into sophisticated trading systems so none of us actually had a financial sort of background or worked in like a Trad fly before getting into this but the system became more s sophisticated so we actually started building um liquidity provisioning Services um for like crypto project then understanding the micr structure better and the the functioning of the order book we then did Market making as a service um no and and then actually transitioned that to proprietary Market making so like proper hftd style Market making on centralized

exchanges and um this was during a time where the market wasn't super competitive and so none of the big Tru by players were in crypto yet so naturally you know naive Engineers with some git could uh become competitive but we knew this was nothing longterm but while we were doing this we also got exposed to some of the what we called back in the day onchain trading which is now I guess all lumped into muv um and that sort of led us down a path where we were like okay this is an entire New World this is a market structure that has never existed before so focusing more in this ecosystem would make a lot more sense because uh we could actually

be competitive in the long term and that's what started all of this awesome and I don't want to uh like just beat your background like too much to death but I think like an important thing to to highlight here because I think it kind of becomes your story and the story of me is correct me if I'm wrong but my understanding of why you kind of left these probabilistic games and enter Ed into crypto space is because you saturated the market and your like um strategies and your success was so large that it was like basically pricing you out of your own games and so basically you need to go find um a different game fortunately you found a bigger game and

so like all things work out but um I I just I love that story because it is a microcosm of everything in me which is the first one there is able to like extract a lot of value but like you cannot just rest where you land like you have to continue on the race you have to continue moving forward because like there is a like Unstoppable wall coming behind you which like once it passes where you're at like there's no value in what you're doing anymore yeah absolutely so um like with all trading style of strategies like there's just very high alpha decay usually and so you just have to constantly push the boundaries whether it's latency whether it's based on Signal detection or what whatever it is and so um yeah you're

very right um so as as soon as either the market becomes saturated by yourself because he take up a large enough space in the market or um just new players enter the market yeah awesome so let's keep that in mind as a theme as we like walk through the rest of this conversation but um I so let's Zoom forward to this kind of founding moment of gataka which first of all um the the name gataka I have to ask like when I hear gataka I think Ethan Hawk and like discrimination based on genan pools but uh real quick like where did you uh how did you pick that name what's the meaning behind it for you yeah you're absolutely right so it is based on the movie so uh both my co-founder Philip and I um we are big fans of the movie

and um you know there's this specific scene in the movie where um the two brothers played the game of chicken right when they paddle out to see and one is obviously genetically Superior so always wins the game uh but then there's one time they actually went out to play chicken again and he the genetically not Superior brother actually won and then um actually saved the other brother and when they came back to Shore and he saved his brother and he was like how did you manage to do this because you physically shouldn't be capable and his answer was basically um because I saved nothing for the way back right and when we entered sort of this trading game and not being like from a financial

background and all of that we we always felt that we were not like we were the the underdog in the game and so just sticking to that principle of not saving anything for the swim back is basically what kept us going and yeah that's why we call the GAA man that is so cool that is so badass and I'm jealous honestly okay so let's let's kind of uh like continue this narrative through the the founding moment of gataka so you it sounds like you're basically like going through this moment where you've developed one of the early like prop trading firms in crypto and then realize like we could probably continue down this route like maybe go hire some like trafi guys some like real quants and

really just do trading stuff but you kind of made this pivot to say like the important thing that's going on here is not necessarily like the individual moves but it's like the whole infrastructure and the whole system so can you like really talk through that moment of like what was that aha moment for you and and I guess like the the parallel story want to tell during this is like what was going on with ethereum during that time was this like pre flash Bots era was this the era where flash Bots was just starting to you know communicate that there was this Dark Forest that we need to like build systems were we already in the relay era can you talk through a little bit about like what was the the block building founding moment yeah so um just to take

a a bit of a step back so when we sort of started shifting resources from centralized exchanges to like this onchain trading world/ MV um we mostly focused on evm compatible El L1 chains and the reason why was because we had built a lot of low latency infrastructure for the uh centralized exchange trading um and that really wasn't an edge on ethereum for example where you had already um The Flash BS me auction right and you obviously have the 12C block times and so um we we did a lot of atomic Arbitrage a bit of cxx Arbitrage as well um but again like we we didn't feel like that is the future

of what we want to do long term like we were always very much driven by the technical challenges and just being very fascinated with this entire new world that has opened up and never existed before but like we were always wanting to do something bigger that was more meaningful and um we were kind of always looking out and always having also an eye on the ethereum ecosystem specifically ethereum main net because that is where most of the activity was happening in general in terms of like liquidity and tvl and all of that most protocols emerging and most also evolution of the market structure because that was the M most mature

Market uh overall in the ecosystem and so um when the transition of uh proof of work to proof of stab during the merge and with the introduction of PBS so propos ability separation um we got very much red pilled by um a few months earlier actually um by uh vitalic endgame post uh where he essentially talked about the fact that you do have these centralizing forces which we were very aware of because we are playing some of these games ourselves um and that for the future of blockchains is actually beneficial if we leverage like these centralized actors

as long as we have decentralized oversight and enforce the rules that we want to enforce and given the outcomes that we want to have with like the entire ecosystem um and so PBS made a lot of sense uh for us uh obviously there are a lot of implementation details that you have to get right and you know it's not perfect yet um but it really made a lot of sense for us and we also realized that we would be in a rare position to actually be really good at this um and the distinction we also made was that transitioning to become a block Builder given like our understanding of me Searchers what their requirements are because we were a Searcher it was also

very important to us that we stop searching ourselves so if we actually do block building ourselves that we don't actually compete for the block space that we offer to our clients so to speak which are Searchers users and all other kinds of block space consumers and so putting that all together it was like okay this is an opportunity to leverage like all the learnings in our journey like across time in crypto to actually Channel this into something that could be long-term very sustainable is more collaborative and also is at the end of the day net positive and not just playing a zero some game and yeah when we had that aha moment and there's a lot of brainstorming how could this actually

be something that is sustainable how do you actually generate a business that's commercially viable based on that we we made a decision and uh became a block build yeah awesome and and I really want to get back to this um this idea that you talked about where like when most people think about me and the me supply chain like it's in the name it's extracted value and and people think of it like whatever's going on here like uh it's probably not good but I think it takes like an educ ated person and a True Believer and someone like yourself to understand the entire supply chain and think like no no there's still positive sums to sorry positive sum games to be played here and it's about

building a system that like not only allows for positive sum but like you know the the natural Glide path is positive sum as opposed to where we were going before kind of like PBS was on the table which was like it's a simple system it works and we're just going to pretend like that all the terrible stuff is not happening be under the the covers right and so anyway I want to get back to positive sum a little bit later but I think now is a great time to talk through like what is the me supply chain and I think that's like a huge question and it's especially challenging in meev because it depends if you're talking about in the pre flash Bots era in the current ERA or in the PBS era but I

guess just for the sake of Simplicity and uh ability to communicate over podcast um can you maybe walk through like what is the me supply chain like who are the key players and and which pieces does gataka um have like a product to to to be part of the supply chain so um like it starts uh from the user um and let's say the user is someone who wants to you know execute a swap on let's say Unis swap V3 um and you know basically has this intent to to create the Swap and then interacts with a Dap and let's say the DAP is as I mentioned Unis swap um interacts with a wallet let's say you know metamask or your

preferred uh wallet and that already has multiple parties in the supply chain so you have the user you have the DAP you have the wallet right okay now the transaction actually gets signed um you know created and then you have M Pools and today you have private M Pools or public me pools there's still a significant amount of transaction in public M Pools but but more and more of the transactions are going to private mles because you know it leaks data and you know leaves uh potential um users like up to being attacked through front running sanding other kinds of things um and so now you have the menol layer um and as part of the men poool itself you

know you can have RPC RPC providers right that are part of the public me pool and nodes obviously in the network but you can also have private me pools and the these are services that essentially just house the transaction and for them to the next participants which can be either Searchers or Builders and I'll elaborate um but there are forms of private M Pools that essentially are orderflow auction platforms ofas as they can be termed um and you essentially have Searchers competing for the right to be able to like capture Arbitrage after user transaction executes it could also be another thing for example you could put

an oracle update through an OFA and then when someone liquidates the protocol that value gets uh kicked back but essentially uh a platform where a transaction can be sent to and different actors mostly searches can compete for the right to be able to execute uh some sort of value capturing transaction transaction after uh the user transaction then usually the winner of that auction um then gets a bundle which is is the originator transaction plus the Searcher transaction sent to the block Builders and the block Builders are essentially uh the main job is to aggregate all these sources of transactions from public men pools from

aggregators from ofas and maybe directly from Trading firms and Searchers and all different kinds of actors l2s consumers of block space so to speak and then sequence these transactions in a way that maximize the block reward and then um once these blocks get created you then participate in another auction uh through a relay and the relay basically is an interface between the proposers and the block Builders and the proposers auction of the right to build a block to build block Builders and again whoever builds the most valuable Block in terms of total block rewards then earns the right and then the relay

essentially chooses the most valuable block on behalf of the proposer the proposer signs off on that specific block and that block then finally gets propagated to the network at which point you have other validators that will attest to the block and consensus happens and it gets out of to the chain so total mess okay so let let me uh just try to summarize and then we'll hone in on the parts that are relevant to this conversation so starts with a user whether that's me doing something on Unis swap or jump uh crypto like doing a massive like like high frequency trade that transaction goes to a wallet and by the way the wallet is really two entities it's the wallet and the RPC provider right and then from there it

goes to the m poool which the me pool can be the public one that we all use or it can be like many different types of private men pools right and all of this is basically preaa correct like none of these pieces is is really where you guys interact with the supply chain so we we are actually in the process of also launching like a private mle product um but that's we haven't publicly released it yet alpha alpha for something you can't get exposure to great so okay got it so that's how kind of like transactions appear to be uh like ordered and eventually make it onchain so then we have these entities called Searchers and um I think we all know that Searchers are like the people

that go into the public M Pools the private men pools and then try to create these bundles which are like opportunities for um you know from their perspective for Value to be extracted from the user perspective it's just the order of transaction so they can appear on chain but the point is is that the Searchers are creating these bundles and then sending bundles over to the Builder in which the Builder is assembling the bundles so is that correct that's correct so something super interesting that you said is that when you guys as gataka decided to get into this game you found that it would be you decided it would be very important to not participate as a Searcher only as a builder that makes sense to me right

like you don't want to like compete against your own customers but on the other side like what is a builder if not just like a a Searcher for Searchers and and I guess put another way like if you're saying you're not a Searcher I guess that makes sense to me but like if you see three bundles and realize that like if you combine them in a specific way you'll get more Revenue doesn't that a essentially make you a Searcher as well yeah so it is more of a generalized searching problem where like usually um Searchers as I call Searchers are usually Traders or trading firms that execute specific strategies and so you know a specific strategy could be for

example Atomic Arbitrage it could be non-atomic Arbitrage so you're arbitraging let's say onchain dexes versus centralized exchanges it could be being a quator so you look for positions that are under collateralized and you know buy back the collateral and all of that kind of stuff which is a value capture opportunity so these are very specific strategies which require specific trading knowledge integration with specific protocols understanding like prices movements of assets and all of those kind of things um a specic specifically in the case of non-atomic Arbitrage also taking on like a lot of risk in some of these cases manag in collateral having a lot of AUM and all

of those so you are proper trading firm meanwhile as a block Builder as we see it and you can there are some very synergetic effects if you're both a a block Builder and a Searcher because you basically can have a look at all this flow you're getting and can trade based on that flow and you can have better execution and a ton of other things um but a block Builder as I see it is basically this service provider that makes sure that for all the transaction Originators or consumers of block space you maximize their inclusion because that's what everyone wants at the end of the day get included on chain and then on the other side of the market you have

the proposes where the you're basically servicing them from the perspective of creating the most valuable block which requires a lot of sophistication and infrastructure and simulations and all of these things um and you're basically serving these two sides market and providing the best service for both and if you're really good at it that's when you are able to produce a lot of subsequent books and so I I apologize if this question sounds condescending because I I mean it completely opposite but like what does a builder do that's not like I I could totally imagine in this construction all a builder does is receive these bundles sorts by like amount of priority fee and then just

like ERS them in direct like uh descending um order so I guess my question to you is like what differentiates a good block Builder like Titan Builder who's able to capture like over a third of the market versus someone who would naively say like hey everyone just send me your bundles and I'm just going to put them in order based on priority fee so there are multiple factors um so I think the the very the most important one um is order flow so without transactions to actually build the blocks you will not be able to competitively build blocks so that's just very basic so once you have order flow and uh are somewhat on par with other block Builders ultimately you want

to be at a stage where you have order flow that not necessarily everyone else has because that leads to even more valuable blocks and we can talk about that as well then it's a function of the latency and throughput of your infrastructure because um the way we think about me in on ethereum you have 12 seconds and it's like an eternity From hftd perspective but in reality like at the start of the slots you only have a very few transactions and then as the slot progresses and you get towards the end um and the beginning of the next slot which is the time for the block proposal more and more transactions come in in

real time so depending on the type of of me um specifically let's say for cxx Arbitrage you want to send your transaction as lat as possible because that minimizes the risk of you being uh wrong about the price of execution on chain and offchain um so that in itself requires you to push the boundary as as far as possible and if you're really good at minimizing the time usually you will have higher value blocks just based on cxx Arbitrage but this also applies to other kinds of Arbitrage even Atomic Arbitrage because the atomic Arbitrage problem is basically an onchain search problem and the more time you have to find like different paths that basically

could cover a more profitable route that usually that also leads to more profitable blocks and then if you combine all of these things together because you have a lot of transactions coming in in real time towards the end of the slot obviously you also have more transaction to search through so in general you have this problem where at the end of the slot you want to wait as as as long as possible and then you have a lot of information to sift through and process and so latency is very important even though you have 12 seconds so latency overall and this is everything from sourcing transactions Network latency processing your M Pools and all of those things um to the second part which is very important for Block building which is basically simulations

so these transactions come in but you have no idea what these transaction do or how much they actually pay and how much pay also depends in what position they block their land right so if you approach this problem very naively you would want to sort of try all combinations and pick the combination that is most profitable and then the faster you are doing these simulations the more possibilities you can try so that's one thing so simulation speed is very very important and the final bit is um basically what people call bundle merging or transaction sequencing algorithms and this is basically how you try and limit the search space so you know you don't want to Brute Force

everything but if you have some smart algorithms you can basically choose or predict what kind of sequences will be most likely more profitable um so I think that's on a high level and then obviously you could go into a lot more details yeah man this is this is going to be a tough uh strange water episode because everything you say just like launches my brain into like 50 new questions and directions and like there's just so much I want to talk about but we we'll try to go in order here so the the first thing you talked about um when we're talking about building a differentiated block Builder is about order flow and I guess like my my first question to that is when we're talking about building a block Building

Company we're talking about GAA here not about uh Titan Builder what like First of all like are you making individual relationships with like Traders and proprietary firms and like huge liquidity providers that says like hey only build bundles and send them to us like do not send them to our competitors or whatever but if like if you only search for us like you know there maybe there's an incentive or there's some sort of benefits but I guess like at the very basic level when you're talking about private order flow like how do you as a company go about securing that like what does that mean yeah so first of all it is all about trust first because um

we as a block Builder a centralized entity and um that we could do in theory Very Bad Things uh with the bundles that are being sent to us so we could unbundle we could front run sandwich steal me from people and all kinds of things so um the first thing is trust and how do you establish trust so first of all by being in the space and having a track record of you know having multiple high value opportunities of potentially stealing M or doing the various things and not doing it I think that's the more critical one and as you operate in the space and uh different kind of projects are familiar with you naturally trust uh uh happens um so that's one thing and it's also just a

flywheel effect of the longer you are in the space and not doing bad things the more people trust you naturally um so that's one thing um and then it's also people knowing about you because if you know there are a lot of entities searchers wallets and all kinds of providers the centers orderflow and we have no idea who they are because we have a public permissionless endpoint um which is you know normal in blockchains and um people just use us and they know us because we have been around for a while have a significant market share um so another big important part of getting private order flow and then the the next step or what we focus on essentially is building out products that are value add

for specific C kinds of consumers of block space and that's when it becomes a bit more of a relationship kind of thing so for example um we have been spending a lot of time uh developing features for CX deck Searchers um because um the most competitive CX deck Searchers currently are Builders as well so they are are competitive block Builders so the two other larger block builders in the space and this just when you are the build and the Searcher yourself you have certain advantages so we essentially try to build certain kinds of products into the Builder that will give like people atically integrated the same kind of advantages and that naturally then attracts different kind of flow and even from the perspective if you have better

execution uh in terms of latency that means you can price for example your transactions differently right so if you have a very slow Builder you you have to price your transactions or your Builder tips differently than if you have a very fast Builder because the EV on your trade is different so so in theory that searer might send the same kind of trade to different Builders but because we can process it faster and you can price more aggressively we have more valuable flow right so the way we basically think about this is how can we unlock more value by building different kinds of things into a builder so that naturally the overall block value is higher which makes us then more competitive and and

would you say like roughly uh just like off the top of your head like what percentage of ethereum transactions come through a private Channel versus the public men pool oh I would need to look at a chart but are we talking like 10% or 50% like what order of magnitude are we talking about here I think the last time I looked it was around 15 20% um but could be more now and I understand that you're a software developer first and a finance person second but based on your understanding of how trafi works like where do you expect the private order flow like percentage to kind of stabilize that I think um most type of transactions that could potentially leak

me will go private um there's just no incentive other than unsophistication to send it to the public mle at the moment yeah makes sense makes sense cool so um I think we've talked a little bit through block building I would love to hear um any like kind of other kind of basic kind of not we're we're in that weird area but anything else you'd like to say about block building and then I'd like to move us on to the relay portion of um of the me supply chain so uh quick pause anything else that uh is worth talking about on the Block building side I mean I think there's probably like a lot but yeah I'll leave it I'll leave it to you to ask questions okay okay all right so um yeah and again

I think first I just want to kind of walk through the meev supply chain and then we'll talk about some of the big things uh in front of us and you've already by the way talks briefly about one of the biggest thing which is the delay inclusion but let's let's wrap up the uh the supply chain and we'll talk about relays so first um I think it might be helpful for you to describe what a relay is but within the context of like why did we need relays within the The Flash bot meev boost Paradigm and like I think we have an interesting conversation about the future role of relays as like they more embedded and we probably won't be able to get rid of them but at least in the first uh

initial sketching of PBS like why do we not need them uh according to the spec so actually in the original spec of PBS there was no really so I thought you were going there but actually um then when we were or the ecosystem actually tried to build this out we realized a big problem of trust and so because both the proposer and the Builder could potentially screw each other over there needs to be an entity that can be trusted so if we want to keep the proposal set decentralized um and you know there almost a million uh proposal on Main it now um the proposer could

potentially do very malicious things so for example if I build a block and I give certain guarantees to searches to send bundles or other kinds of participants um and I just give the block to the proposer the proposer can in theory just take the block and you know capture all the M themselves after you've done all the heavy lifting or steal me or screw users over all kinds of things so um if you can't trust it proposer as an issue for the Builder the same the other way around because the Builder actually builds the entire block and the Builder says Hey the block is worth let's say 10 e but then if I sign up on it without knowing what the actual content is and if it's actually worth

any then the biller can obviously grief the proposer right so there distrust problem and that's essentially what a relay solves it's basically just a coordination mechanism so that um proposers Can Source these blocks and the builders can basically sell the blocks or buy the right to build the blocks from The Proposal without getting screwed over and you used the magic word during this and you also used it when we were talking about private order flow and and I just find it so interesting that the deeper I get into this space of trustless It kind of turns out that everything important rests on trust and so I don't really know what that says about this space but like it is just

like so interesting to me that like we're building a system to create literally trustless and like what are the most important things to have a trusted relay or else the system breaks down I I I should cover it actually that the the way the relay ecosystem is um evolved volving is that trust actually will become less important so already um relays are essentially proposing or are processing blocks from block Builders optimistically and they do this by having Builders lock up collateral so that they can be slashed and then their designs in in a way where you don't even need like the builders will still need

to lock up collateral but you won't need a relay to actually enforce this so they actually designs where we can get rid of the relay but in that world the only reason why the relay is still useful is no longer because because of trust but because it solves a coordination problem and and the coordination problem is the all the proposers having connections to the proposers and then being able to the the block builds being able to communicate with the proposes and then also um which you can in theory do through a P2P layer but but by having a centralized relay um even though you don't need to trust them necessarily um you you you basically solve a latency

problem that you would have if you go directly VI the P2P layer yeah and I I think that always uh when we have trust problems right like the the goal of this space is always to replace trust with cryptography and cryptoeconomic guarantees and by the way that is why like the igen layer moment is so closely tied to the ZK moment uh conversation for another time but I I so so just to be clear what you're saying is that like let's imagine this future world where we've solved the trust issue on the relay but it still serves a useful purpose in that each uh ethereum proposer won't have to connect to every single block builder in order to find the best block like there's a

single coordination mechanism I guess my question to you is doesn't that imply that there is a single centralized relay because what we have today is like basically an equivalent number of block builders in relays like I don't really understand how we're getting any uh benefits from that on the relay front um I think um most so some relay operators actually self capping so they could in theory have more market share because they're more performant than others um but as part of being more aligned with the ecosystem and understanding that there's more robustness in the system overall if it doesn't all go through a single relay um is an incentive for that specific uh entity to self cap um but yeah like the nature of

latency games naturally have like a a power distribu power law distribution right and so naturally it just gravitates towards very few entities that will be very sophisticated and like be able to optimize all these different kinds of problems in order to like keep pushing the boundary and being competitive I guess this is a clunky segue into to like the Titan relay but um I guess as of right now none of us really understand where the value capture in relays is yet they're kind of like a altruistic service needed in order to make like the two money-making sides of the equation work um I guess like I would love to hear why did you guys decide that you needed to build a

relay and how much of that was solving a technology problem that just needed to be solved and how much of that is looking forward and realizing that while there's no value capture here today this is clearly where a lot of value is going to sit in the future and we need to like not get CAU flat footed on this I I wouldn't be able to quantify the breakdown across these two but it certainly is both it started off initially just as a defensive and move and as a techn technological problem that we need needed to solve just because we as I said before we shifted our entire business into being a block Builder which very much relies on the relay ecosystem system and there were issues that we were seeing in the

landscape even though like existing relay operators do tend to push the boundaries and innovate and there are certain problems that we think we could solve better um and then also because there is this pressure to vertically integrate and we had heard rumors that like the our biggest competitors who are already vertically integrated as a Searcher and a builder we're also going to start a relay where you have Searcher Builder relays and so we kind of wanted to front run that specific scenario and launch a Rel that is really really competitive and and because if you have a Rel that is really really competitive and just from a latency perspective and there other things you can do other than

latency but just from a latency perspective you sort of almost commoditize the latency Edge and then there's no longer a reason or the incentive to actually go out and build a new relay and bootstop this ecosystem with all the proposal is not really there anymore so we kind of wanted to front run that got it you wanted to just build the best one so no one else bothered and we could just move on from this conversation correct correct because it's actually one of the you know key capabilities that we have as a company so you know let's leverage that awesome and I guess final final thing on the relay here is again I think we're all realizing that although the original PBS spec didn't uh account for realize that like they're not going away um and

and I can imagine a world where they really just are this like coordination point between you know the millions of proposers and like the unfortunately like two to four block builders that we're going to have but uh like fortunately for you but um I guess as you look forward do you really see the relay just kind of like settling into this like very important but minimalist functionality or do you see the like endgame state of relays as like serving more purposes in the ecosystem whether that's supporting other parts of infrastructure or like providing more opportunities for me or proposer value or I guess like while

we're still in this like primordial stage of figuring out what the point of relays is do you have any thoughts or predictions on like what a final state relay looks like yeah so um I certainly strongly believe that the relay will will act as a entity in the supply chain that is going to do more than just uh relaying blocks today as they do today um I can't speak too much about the things uh of specific details because I think it's too early to talk about publicly yet but um I strongly believe there's a lot more opportunity that's not actually directly me related and more of a generalized ethereum

infrastructure uh play damn well you got me in TR I got I guess we're going to have to have you back cool all right so um I would love to kind of pivot the conversation now to talk about like some of the like the big hairy conversations that we have with um like me and block building and all that stuff and I think the the best one to start on is one that we've already kind of danced around a little bit which is the inclusion delay and so I guess uh real briefly I'll describe what I what how I understand what the kind of issue is and then I would love to hear from your perspective as a block Builder um one am I correct two like do you think that this is a real problem and whether

or not you think this is a real problem how do you think of building a block Builder with this new meta in mind so real briefly um as Kuby said earlier like what we're all realizing uh is that the longer you wait before you propose a block the more opportunity there is to extract value and like at the very basic level there's just like more transactions for you to mess with the order with but there's also like more complicated stuff like you know the price moves only once every 12 seconds on ethereum it moves every nanc on a centralized exchange and so you have less information if you propose at the beginning uh or sorry if you create a transaction at the beginning of the 12

seconds versus the end of the 12 seconds and so there there's more value in being later the problem is is that if you're too late with your block proposal then you're going to miss slot and if this happens too many times like we really risk threatening the stability of ethereum itself and so what the debate has like kind of come to is we're one realizing that these uh these delay games like have implications for the security of ethereum or sorry the stability of ethereum but two we're realizing that like latency kind of is a proxy for um how much resources you have and how much resources you have is like

another way of saying how centralized you are and so like another fear let alone the stability of ethereum but this inclusion delay problem is going to have like inherently centralizing pressures on you know the the block building layer of ethereum and so um the the question is like what do we do about this and so my question to you is one is that like a decent understanding of what the conversation is and two like do you think that this is a real problem and something that needs to be thought through or is this just kind of like people who don't understand the manua like looking under the covers and getting scared mhm so um I think it's a good framing of the problem um I I I

think there's something I would add specifically in regards to sort of the liveness or the robustness of the network um being impacted by some of these timing games um so the issue is that the risk for the entity that is let's say it's um delaying the proposal of the Block in order to maximize value is playing what you call sometimes um in the market making game like picking up pennies in front of a Ste uh a steamroller right so because you might marginally let's get another percent for every let's say 10 milliseconds or so but then um

you miss the entire block and you get nothing right so I think there's a natural incentive for the different entities that actually play timing games not to push the boundaries too far because actually it will be negative for them right so I I don't necessarily think it will be an overall um lightess problem for the network we've seen some other funny time um side effects of this which is for example for um proposals that are not very sophisticated like like at home stakers for example example um if your network connectivity is not good and you push the and the previous block proposer pushes the boundary too too far even though that block will actually still get included but because

the attestations happen later that proposer actually doesn't see that that block got enough attestations so we'll then start building a block on top of the parent the previous parent which will then lead to them being reor because that that was actually not the actual canonical parents that they should build on so there are some other side effects that we are starting to see now and it's still somewhat early days and all that to say it is definitely a problem that people are uh thinking about hardly mostly the have naturally um I think there has been a realization that block proposal doesn't necessarily need to be done by the validators itself

um and you know there are different forms of proposals actually that come about like execution tickets or um slot auctions or different kinds of mechanisms but actually um in order not to impact the the validators which are really responsible for the oversight of the network we it it is basically a legacy thing that validators are still actually the ones that are proposing the execution payloads so maybe we can come up with systems that actually solve this problem somehow um and you know lots of big question marks around that what that would actually look like but I think that's a realization that's getting more and more traction um and I'm quite uh excited about potential ways of solving

that problem just based on that by separating those worlds out yeah God that's super interesting so I I think what you're saying is that the way it works today is like okay so Titan Builder will build a block we'll send it to the relay the relay will send it to the proposer the proposer will receive the block throw their signature on it and then send it to ethereum network where it's confirmed and what you're saying is that we're realizing that that's like pretty inefficient and instead it can when it's the proposer turn they can like kind of signal backwards through this supply chain to say like Titan Builder we choose your block and then instead of the block going through the supply chain Titan Builder could send it directly to the

network and then it is is that kind of the idea so it goes even further than that so so the way it works today is like you said like the so the proposal doesn't even see the block right the proposal blindly signs off on a bid on a value right so why do we need this proposal to sign off on the value of a block that they don't even know what the content is why do that in the first place so what about if the protocol itself for example auctions of the right to be a proposer in the first place right so so the different validators to do their testing and all different kinds of things but they don't actually have to be the entity that then signs off on the proposal right so just like

disconnecting that completely from the validator is the thought process and then there are different ways of how you could potentially do this which is yeah another rabbit hole man that is yeah I I'm literally just going to hard pivot right here because that's so interesting and so Green Field that um I can keep this on here for two more hour so anyway um another thing that I think is worth talking about is We on outside of the me Community look at um just like the numbers and the market share numbers and and we think like it's easy to look at what's going on in me and think that this is a huge centralization risk and like what's the point of like doing all this stuff with millions of validators

when it turns out there's like one or two guys building all of the blocks that like then we just like as you say like get like random people to blindly sign off of like kind of what's the point of all this and so I guess my direct question to one of these entities is like how do you think about the work you're doing and the implications for like core protocol mainnet centralization is that something you worry about and if it is like how do you um you know like Point your company in a direction that doesn't like end up eating the thing that you care about so I I think when we talk about centralization we should talk about what exactly is the problem about

centralization right so for example like the you know the biggest one like at least from my perspective is like censorship resistance um which is um which is something we care about and we are currently trying to for as long as possible not needing to sensor transactions and we are one of the last remaining larger Builders actually doesn't sensor transactions but I think it's quite important that actually on a protocol level if you sort of Outsource the task of block production to entities whether it's one entity or more um the the protocol still retains the oversight and a way to enforce the properties that it wants the protocol to have and so I I think the latest in um the latest um I

guess efforts by the EF to um battle sensorship resistance um or sensorship is um inclusion list which might hopefully make it into the next hard Fork Electra um but I I think rather than saying just putting it in a in a box of saying centralize is bad like what about C centralization is bad is it like the robustness is it um uptime is it like censorship what are the specific properties and then let's design the system in a way that those properties that we don't want we can enforce them which is you know what we can through the validator set and correct uh protocol rules that's how how I look at it and also that's how we engage with

the Y and um other ecosystem players to try and think about those kind of problems yeah I think that's super fair and um let me ask you this big question and I'll just uh spoil the punchline which I think the answer is yes right but do you think a world in which there's just one single block Builder but every proposer has the ability to self- block build and has um you know access to CR list or inclusion lists or whatever and I guess sorry for the audience what uh inclusion lists are just the ability for individual proposers to say I'm going to take the block from Titan Builder but I also like require you to include these

transactions and each individual proposer can decide what these transactions are like myself as a home Staker not really worried about the government reverse engineering my signer keys to find my address so I'd be like I believe in ethereum I want to allow o ofac sanction addresses so my inclusion list would be even if uh another Builder doesn't include ofac sanction addresses I want to include them in mine so anyway do you believe that an ethereum that has a single centralized block Builder but has inclusion lists and the ability for proposers to self block build is that congruent with the world computer and is is that okay for ethereum or do you think that that is um an example of an

ethereum system that has been captured by centralized forces I don't actually think that such a world could come into existence because even today like we let's say we have two three builders that are building most of the blocks but you still have a long tail of builders that has soon as any of the block Builders goes down or has a bug and comes a little bit less less competitive like other Market other builders immediately gain market share and this has been going on for months so I do think that like the more consistent larger market share is going to be captured by very few Builders and um just because of specialization most

likely it will not be one but even if like the the short tail is really captured by one like big block Builder um as soon as there's an issue there will be lots of other block builders that immediately gain market share um so I I don't think it's realistic that they'll exists yeah all right good answer so okay two two more subjects that I want to just like touch briefly and I know we're running out of time so we'll go quick um one I want to talk about so what what I love about like ethereum is that they're literally telling you like on YouTube what's coming in the future like I'm imagine if like Elon Musk like did his like R&D stuff like just out on YouTube and we

could all watch it and so we've been looking at PBS for a long time and the cool thing about PBS was this concept was created to deal with me and then we realized that with this new paradigm this opened up uh DK sharting like we needed proposer Builder separation in order to like make blobs possible and so uh my question for you as like what do do you see any other like interesting opportunities that proposer Builder separation has created for you that like maybe people that are not uh you know like elbow deep in the me pool and don't really understand like how core ethereum works like don't really understand yet

so one interesting one that has been getting a lot more traction recently is um sequencing um so and specifically base sequencing or the L1 one or ethereum itself becoming a sequencer for the l2s um which requires a lot of sophistication again because now you're not managing state only for one um domain but for multiple domains so you know you can think about that complexity and because PBS already exists and has certain kind of actors that have already solved this problem like in one domain and are capable of solving this across other domains that

actually opens the door for the L1 to become competitive to actually be a sequencer across and provide that service to Al for example um that's one very interesting one that we've been spending more time on recently yeah that's very cool and you know like the whole idea with the with Dank sharding and how that transform ethereum is that like each blob like let's consider each blob like its own L2 right and then there's 64 blobs per block so we have like 64 different l2s going on at a time and then like the question then becomes like okay well like the evm itself like what's the difference between the evm itself and that state and like the state that's contained on a blob and so like I

guess in this endgame ethereum that you're talking about like yeah like basically the capabilities that we developed on ethereum Main net um become applicable to everything else and on the flip side like ethereum main net just becomes another Computing environment just like all these other l2s and so yeah I I I didn't think about this this is a really cool like thing that PBS unlocks um is for like the ability to um just build your shared sequencing directly into like literally main net MH very cool very cool all right last last question and then I'll let you go but um I would just love to hear from you like when all of the block builders get into

your room and for all your like crazy little block building part me parties like what is the thing that's most exciting and like most interesting on uh you know like the the medium to long-term road map of ethereum like what what are you guys looking uh towards and like how do you think ethereum is going to transform in a way that we don't really understand yet I think what I find Most Fascinating is uh the evolution of the market structure and it has become quite apparent um like as I said before for example that um that the the way proposal of blocks is being done today is actually not optimal or far from it and is actually having negative

side effects on the network itself and so thinking about a world where the market as it exists today and proposes are no longer validators and maybe it's a new entity or maybe the protocol is selling um directly the right to propose slots to let's say build ERS or other kinds of speculators maybe there's a block space Futures market and you have some trading firms that load up on these Futures and then sell them to builders in real time um to to actually then build the blocks for them just thinking about what the possible scenarios would be and how like a builder like ourselves fits into that P picture is very interesting and then um as I said before um also the this whole idea of doing

sequencing across other ecosystems and like unifying that into dl1 is also very exciting for me to think about yeah very exciting all right kooby thank you so much we're already over time and um I I'm going to stop us here because like we didn't even touch like onethird of the interesting boxes that you pointed to so much appreciated we got to get you back on the Pod but um I just got to say thank you yeah thanks for having me so before I let you go just uh for the audience can you let them know where they can find you where they can find GAA or Titan Builder and if they're like interested in learning more about how block building and how the M Supply Chain works like do you have any suggestions on where to get started okay so let's start with geta on myself uh so

um I'm just on Twitter so my DMs are open as well so feel free to message me so just KY men um on Twitter um so gataka or Titan Billa specifically just Titan bill. XYZ um our website and have a bunch of docs on there it's actually surprisingly hard to find any good information and coherent way like uh online about PBS and like the whole supply chain and also because it keeps changing so so often um like most of the stuff is then outdated I think I recently came actually across um a project that is feeding a lot of uh content into chat GPT and you can just chat with it and it will give you the latest answers including videos and talks and panels from like uh conferences I don't have the link top of

mine but maybe you can share that later all right Koy thank you so much really appreciate it and uh have a good rest of your day YouTu man cheers