MEV Markets: Flashbots, Censorship & Exclusive Order Flow | Westie

Transcript

[Music] what's up everyone welcome to an episode of Xerox research a show hosted by analysts where we will be talking with the top research Talent project Founders and thought leaders in the space we're going to ask the hard questions and we're going to get really deep in the weeds so if that sounds like it's for you you're in the right place my name is Sam Martin and I'm Dan Smith you know this show is made possible by our incredible sponsors chain analysis and Flipside but uh let's get right into it you know today we have a great episode uh we have a super informative interview with Westy from blockworks research he covers all things ethereum infrastructure for our team and he really dives into the Mev landscape in proof of stake ethereum before we dive into that we got a good little intro

section for you all where we're joined with two of our other fellow research analysts here at blockbust research Xerox pibbles and Matt guys how you doing today what's up doing good thanks for having us I think one of my favorite uh rebrands is smart contract platforms into layer ones uh it's like such a smoother easier to understand term and you know it's it's pretty funny how how big of an influence that uh just like in nomenclature and naming mechanism can really have on on you know how how this technology progresses uh Sam I know you're you're a big nft guy yeah I'm just really excited about uh Apple kind of like giving the clear guiding rules around you know what it's going to mean for people trying to integrate nfts in the App Store obviously they're trying to take the 30

Cut Rate like they want to keep that Stranglehold over the market but in general I just think now that play and earned games have a clear guideline around what they can do in the App Store and what they can't is is really good news and a big step forward plus it looks like they're going to be uh supporting non-custodial wallets which I wouldn't have expected but they are like going to decide where the crypto can actually come from what kind of tokens can be included what kind of features the nfts can really unlock so it's going to be limited but I kind of view this as like the gateway drug and I'm really happy that Apple's finally providing some clarity I think what's really important here with the digital Collectibles is the house money effect where you have these people who spent like very little money to get in they

make some profits they have a little more money to play with to stay in crypto I think that's the most important thing for onboarding new people yeah I think you bring up a great point there it's like super easy to hate nfts uh when you see people making six figures on you know pictures of board apes and whatnot uh until you're the person doing it right I think that the red-n nfts brought in a new wave of people who hadn't previously dabbled in the nft markets so yeah it's a I like that take a stronger agree there what do you guys think about the FTX stablecoin does that surprise you at all or is that something that you're like man why didn't they do that earlier yeah totally why didn't they do that earlier like everyone is launching their unstable coin now like we're seeing with

Ave and curve although they've been launched yet um and there's no reason not to right usdc circles making an insane amount of money holding that Capital they have 40 some odd billion dollars in you know dollars sitting in short-term treasury notes and even if it's in a bank you know they're getting a ridiculous interest rate on these funds and it just makes so much sense for everyone to have their own stable coin yeah right like even if it's you know short-term treasuries are yielding you know three to four percent through three to four percent of like you said 40 billion dollars is uh no small reward uh you even see binance kind of moving in this Direction with popularizing busd for their clients like they're really kind of forcing that on there I believe recently they announced that they're converting all stable coins on their

platform into busd and like still giving users the ability to kind of withdraw into a different token but while they're on Exchange they're held in busd so it's uh yeah I think this is a pretty smart move by them to kind of capture and capture pebbles in two years would you say that ftx's stable coin is bigger or binances that's a tough one uh I think I'm gonna go with Finance because Finance is King Matt you gotta take there I would tend to agree binance is so ingrained in the space and even though maybe in the U.S FTX and ftx's dollar will be more popular I think across the globe binance is just a step ahead fair enough fair enough so uh what do

you guys think about Elon taking over Twitter people are speculating that uh that you know this is kind of a pay on payments that that's always been his passion what he wants to do do you think there's any crypto integration uh coming in the future and uh is it Dogecoin so I think elon's made it clear that there will be payment integration now whether or not it's Dogecoin I'm not going to speculate on I would tend to believe probably not but I don't want to say that because you know anyone who long Doge over the last week is up big you know we're out here in the governance forums like looking on chains spending our time doing in-depth research and none of us have made as much money this past week as people who are just dgen leveraged long you know Dogecoin so um you know salute to the kings and queens

out there trading Dogecoin but honestly I definitely would tend to believe that that might not be the case Matt is talking about himself here by the way he was leveraged along Dogecoin for the record no comment yeah I think this is low-key like it could be really bullish for lens um all it takes is I mean no matter who takes over Twitter like it could be anybody there's always a rough transition so hopefully Elon fumbles something and ruins Twitter and then it just really encourages a lot of people to move to lens and maybe we can actually make some money off of that

somehow because if I'm Elon and I'm a prophet Maxi I'm just gonna throw ads all over Twitter like you've never seen before I love it Pebbles with the money move plays always uh let's move into the hot seat cool Throne section of this Dan do you want to start us off who's your hot seat this week yeah let's do it uh hot seat all layer ones I mean it's been a it's been a rough go the past couple weeks for this but especially uh this past week right so we've seen New Year's usn stablecoin was shut down uh it was actually a real the team announced it was under collateralized by about 40 million dollars um this USA and the staplecoin seemed promising uh and quickly proved to not be so uh not a good sign there then we

have Solana tvl following under 1 billion dollars which is a pretty actually a big milestone here because optimism and arbitrum uh two l2s actually have more tvl than Solana so you're kind of seeing that you know the place to be is ethereum uh and these all layer ones are kind of falling off and then with a just to put a huge exclamation point on all of it uh crap dose it's a wrap dose I mean Aptos was just a brutally botched launch you know I I've bridged over there pretty early it was like ready to play around and I'm there's just nothing going on that's any level of exciting um yeah tried to be like the positive guy when all of crypto Twitter was just shooting on it but capitulated there's no reason to be

positive so hot seat definitely out there once uh cool Throne Xerox ngmi the founder of D5 llama that man does not stop shipping uh King shippur uh he recently just launched llama lend which is a nft lending platform on top of all of the data dominance that D5 llama is pushing into their recent hacks platform or their hacks dashboard is is awesome um you know I love just like it's kind of a scary chart when you see how much money has been exploited from D5 but you know I think that helps Drive Innovation and hardening forward right like you know we have to accept the fact that we have these mistakes in the past and kind of build off them and move forward do

you think Xerox not gonna make it ever sleeps never there's no way I'm partially like convinced he's like three different people that pretend to be one but then like you know like if you read his tweets and like you win a couple discords with them uh them they they they're like all the talk is like so fluid so I did have this conspiracy but I think I've I'm back to it's just just one person that isn't pure grinder all right I could take this one next hot seat I'm kind of riding off the coattails of Dan but I'm going Anatoly after the the mango exploit or poorly designed protocol that was taken advantage of he uh or not him but other people have been tweeting how Solana D5 is just absolutely dead and I saw he liked one of the tweets so that is enough to get it on a hot seat for this

week in terms of cool Throne I would definitely have to go with the ZK evm teams they're all kind of fighting on Twitter over open source code and whatnot but in general I think they're all educating a lot of people on ZK Tech through their like Twitter accounts and and blog posts so I think that's awesome and I think it's pushing the space forward Pebbles you want to go next yeah I got it so my hot seat is definitely ape coin and that entire Dow they don't know what the hell they're doing with staking they put up a proposal literally yesterday um talking about a five million dollar bug bounty on the staking contract which is supposed to go live next week um so they want to get it audited so

that I mean just that way like nothing goes horribly wrong because we know that board Apes love to lose money in all kinds of different ways um so what's funny actually is that the bug Bounty proposal is currently not going through so everyone's voting against it because they want staking as soon as possible so this kind of sets the precedent for the community are they going to be like fast and Reckless or slow and careful if the bug Bounty passes then staking rewards would be delayed until December but if the bug Bounty doesn't pass then staking will probably go live next week rewards start mid-november and someone's gonna exploit

it probably then for cold Throne I have pantoshi just on crypto Twitter he got bearish at like 60k Bitcoin he sold the top uh I think maybe like two weeks ago he started buying his coins back like ethereum probably like 1300 Bitcoin 19k level and he kind of just rode this rally like a king and then he sold everything at the top and now he's just fibing so got to your Trader Sean agree on that one pentoshi's like one of the only big accounts that I actually like truly respect that guy nailed this last cycle yeah I'm pretty sure he literally called the top for my hot seat I'm going with

core scientific core scientific is one of North America's largest Bitcoin mining companies and their stock is down 99 from the top in November of last year it was down 78 on Thursday last week alone they have over a billion dollars in debt a lot of which is the creditors like block fi Anchorage nydig um so we might see like a potential bankruptcy could have a butterfly effect that goes into other areas of crypto which obviously would not be ideal also they're currently operating at a loss is there like electricity cost is rising and bitcoin's price is too low for them to making a profit so whether or not they're going to go bankrupt or if the stocks buy or sell I have no idea I'm not an equity analyst but clearly they're in some trouble so they deserve

to be in the hot seat I think as far as my cool thrown is going over to the Kings at golden tree and golden chain um golden tree is a huge hedge fund 45 billion dollars in the crypto Traders over there or the golden chain you know part of the company they longed Sushi about 20 some odd days ago and their bags are up at least 60 since they did they announced it publicly so you I could say with a high degree of confidence that a large portion of their gain was from their Public Announcement even crazier if they wanted to they could probably like get in that short position sell their you know public on chain bag everyone knows their address and ride it even crazier I'm not saying they're gonna do that they probably won't but it's just insane to see what they're doing in this kind of activist

investment in crypto is definitely something that's going to be repeated they're setting uh they're setting the stage everyone's going to kind of copy them if I had to guess and I think that you know the King Kings and Queens Traders over there definitely deserve a head nod and yeah strong agree there you couldn't agree more I think that's a trend that we'll see continue uh Dan you want to get our flip side chart of the day pulled up so we have this great dashboard here that actually flagged he actually tweeted about this yesterday and it's it's built by kakamura from a he's an analyst over at Flipside crypto and this is a great dashboard covering all things sushi so he's got a couple different tabs here ranging from users interactions transaction volume fees and revenue breaks down some of their

liquidity pools and even some market share analysis uh and so for those uh those of you listening rather than watching on YouTube you know some of these charts uh are super informative right like I always find it pretty entertaining to go look at like transaction volumes and revenues uh on different blockchains for these protocols that are cross-chained now and you know like we still see ethereum mainnet accounting for 95 96 of all revenue for sushi swap even though it has launched on some of these other l2s and so they're gradually gaining traction but you know we're still kind of in that development phase um and then transaction volumes for dexes I think is always a really fascinating Metro trick you know we see that the peak back in November uh you

know transactions on Sushi swap kind of topped out around 1.7ish million uh transactions and now we're kind of Fallen right around that 900k level so you know on-chain activity is definitely cooled off in like Dex Dex uh Dex transactions and Dex volume is a great way to monitor this but Matt actually you flagged two really interesting charts and I'd love to dive into those and kind of get you to to walk us through what you what you found out here yeah so it's actually really nice finding these this dashboard because Sushi is a protocol that doesn't have a whole lot of great data out there normally I'd have to query it myself and have you know other teammates at blockworks research help me so coming across this was great just looking through it as I wrote my report on Sushi last week the Bull and Bear case you

should check that out there's a good Twitter thread too just a little plug but anyways I saw this chart and it's you know it's interesting to see that more than 50 percent of users across all of the chains that Sushi's deployed on are trading on arbitrum so like that's a lot right when they launched on ethereum initially I would have totally expected ethereum to have the majority of Traders but it's really interesting to see this I then went and checked another chart which was their volume charts so here we saw like the volume split up by genes and as you can see arbitrim only accounts for about 20 of the total volume so while there's a ton of trading going on on arbitrum Sushi swap there's not as much volume as on ethereum mainnet which still makes up for the majority there's a few possible Theses

of why this could be true the you know I guess the optimistic one would be that because Arboretum has low transaction fees you know people who don't aren't don't have enough Capital to trade on ethereum mainnet can go to arbitrum to trade smaller amounts of capital maybe a little more pessimistically and maybe also in my opinion maybe a little more likely it's probably people hunting for an RB token airdrop just using the network you know maybe wash trading but no matter what it's interesting to see so much activity on arbitrum and it's it's really good to see at the end of the day because as ethereum scales and more users come on next Bull Run comes around it's like ethereum maintenance fees will do the same thing that happened last time so we we will need these Roll-Ups in order to support ethereum scaling it's also great that

someone was able to make this dashboard with Flipside because you know this data is really hard to come by yeah and this was a great find um just to kind of recap what you said for those of you again listening and not watching Along on YouTube so basically we have two charts here and the first one is a distribution of users by blockchain and it shows that about 50 uh or so of sushi swap users are using ethereum maidenet and or excuse me are using arbitrim uh and wow only about like 30 or so percent are on ethereum mainnet so the users themselves accounting the wallet addresses and then if we go over and look at the distribution of swap volume so rather than counting the wallets we're counting

the amount of dollars traded and we'll see that kind of the opposite is true and there's 76 percent of transaction volume is occurring on mainnet well a smaller portion only 20 percent is on arbitrum so we have 50 of the users on arbitrim but only 20 of the transaction volume and I definitely agree with your slightly more pessimistic take that I think that this is really it's it's airdrop hunting season and you know we're in the depths of a bear Market there's not a lot going on like people are hunting these air drops I think it was uh just yesterday nanson on the trending contracts on nanson were literally all just potential air drops um so definitely kind of feeling like that's the direction we're moving right now uh yeah and again just want to give

a special shout out to Flipside for this data you know they have the most comprehensive on-chain data in crypto to help you get the insights that you need to work smarter and they give you the ability to instantly query this data yourself and if you don't have like the SQL skills to do so I highly recommend that you kind of take the time to dive into SQL it's it's pretty easy to learn as far as programming languages go and it just gives you the opportunity to to you know kind of build these dashboards and create this analysis yourself but if that's not the case Flipside does have like a public dashboard or public dashboards that anybody can go check out and just like this one here we'll link this in the show notes for sure and definitely be sure to check out uh uh the exclusive offer that Flipside has

set up for address right so Xerox research listeners have an exclusive opportunity to earn up to 75 dollars in usdc just by completing a simple Bounty again we will link that uh in the show notes But be sure to check that out um and yeah one more chart I want to take a look at here and kind of get your your take on Matt so this is monthly breakdown of Sushi's market share on ethereum mainnet and it Compares Sushi swap volumes to that of uni swap curve and balancer and if you can see back in 2021 you know the market share was pretty solid like sushi swaps uh annotated in this pink chart or this pink color here and they had like a a respectable size of the market back in

early 2021 but as time's gone on uni Swap and curve have kind of eaten away at that market share and what do you I was curious to get your take you know you're our in-house Sushi expert so I'd love to get your take on what Sushi can do and what they can focus on to kind of regain some of that market share yeah and just to clear one little thing up about the past chart I went over I forgot to mention it's just that both of those statistics the 50 over 50 of users and 20 of volume are both for the month of October so this is like new and it hadn't been true in the past anyways to Dan's next question Sushi's like you know the technology that it deploys right now is uniswap V2 and it's not really competitive in the market compared to uniswap V3 and curve you

know they're just better Technologies and unit swap V2 can't really compete they are working on something called Trident which is a concentrated liquidity amm if Sushi is to come back and like take back their market share and maybe even take over the market they need Trident to be extremely successful it needs to be more Capital efficient and it needs to attract enough LPS so then it has deep liquidity Pairs and once it has deep liquidity pairs to look at the you know the trade it'll get the trading volume it says the trading volume to get the fees so like it needs that flywheel in order to succeed additionally Sushi's working on a couple other things that I think could really help with it like entrenching it and it's market share they're the first Decks that I know of that launched or they're not the first but the biggest

that launch an omni chain decks meaning you can trade across chains so use Stargate to do that but if you want to say use your usdc on each mainnet and go buy GMX token on arbitrum you can actually do that in one click on Sushi it's called X trade or x-swap Sushi X swap so I think they need to like continue to capture that market the Omni chain market and that'll help entrench them in the long term as well two more things I think would really help is right now they're spending and their treasury is kind of out of line there's a lot of you know maybe they've had issues with leadership in the past that have led to not great organization within the Dow but I think this is actually being worked on currently they just hired a new Chef Jared gray and kind of his whole job is

to audit the protocol audit the team see where money's being spent that maybe it shouldn't how the how the protocols should move forward so I think he's really going to help with that but definitely they need to get their organization in check and uh their treasury spending and lastly I would say that that they kind of need a new tokenomic design the way the sushi token works today is a little outdated it's not very sexy for investors and I think that a revamp of the token would really help with you know bringing them back into kind of the common narrative yeah some of these uh gen 1 tokens definitely could use a revamp there's no doubt about that um and yeah I also agree like the partnership with layer zero and doing that Omni chain activity is pretty bullish in my opinion but Sam anything

else you want to hit here or should we kind of jump over and uh get ready to get ready for this interview with Westie no I think that's all we got thanks for coming on uh pibbles and Matt that was great it's my pleasure of course thanks for having us before we get over to our interview with Westie on Mev and proof of stake ethereum I need to shout out chain analysis they have some of the best on-chain forensics tools of anyone in the space and you can always be sure that the data is accurate they also have great research on their site on the insights tab which we can link to the show notes super underrated tool great insights and I highly recommend you check them out over to West Westy great to have you on man we're really excited to chat about this recent report you

wrote it was titled Mev in proof of stake ethereum Westy how you doing today doing well man appreciate you guys having me on love to hear it so yeah so this is all kind of a about the the Mev process in the proof of stake ethereum uh World we're now living in post-emerge and so you like right at the beginning of this report uh you kind of gave a great definition of what Mev is and yeah that is the amount of profit that a privileged entity can generate by including excluding or reordering transactions From the Block they produce uh and so that in the proof of work ethereum world you kind of go into how that was like the miners role but now with this transition to proof of stake uh there's like a different process for

what this is so I'd love to hear a little bit about like what this process is and the creator of this process right so flashbots so if you could dive into what flashbots is and what Mev boost is I'd love to hear like kind of how that transaction flow works definitely uh going back to that that definition I kind of want to change that a bit at the end I said um it comes from transactions from the blocks that they produce which inherently basically suggests that only privileged entities are the miners of the validators which is the case uh in ethereum but with something let's say like Solana the the privilege actor isn't necessarily A validator but the privilege actor is

um The Entity that has the fastest latency because they can essentially order the transactions the way they want because they were able to extract the Mev opportunity that others couldn't so just wanted to clarify that first because Mev obviously doesn't just exist on ethereum um but yeah I'd love to I guess start giving sort of a background on Mev like how the concept came to be um essentially I think it was 2019 there was a paper written called Flash Boys 2.0 which was like the first paper to actually Define Mev in a similar way that I just defined it and it basically highlighted like Arbitrage opportunities um sandwich attacks like things that

existed as a result of dex's on Smart contract platforms um and this basically opened up the doorway for more research on uh Mev like how is it how it's extracted how like certain entities can extract it and it sort of opened up the door for um research entities to come in who are specifically focused on Mev and one of those was flashbots which was created in 2020 um and it wanted to essentially mitigate the negative externalities of Mev and those can be like centralization because of one entity is the only one that's extracting this Mev

um all of a sudden they can especially in a proof of stake Network they can accumulate more stake than other validators and all of a sudden you have some sort of sort of centralization function which is just not good for the network and then also bot spamming because like I said on Solana um Mev is extracted using latency and like that's obviously not good because it increases the the gas costs and something like ethereum like prior to MAV Geth um essentially Mev was extracted through like bot spamming which was just not good and so it wanted to mitigate these negative externalities as well as just bring sort of transparency to Mev because it was kind of like a

dark Forest which is actually a paper written by um paradon about Mev like it was no one really knew what was going on so wanted to bring transparency democratize the access to this Mev reward so it wasn't by the same entities and figuring out the most sustainable way to distribute the Mev um and so first they created Mev Geth which was basically like a version of the go ethereum client but it had some sort of sealed ID block space auction and rather than a transaction going to the mempool it would go through this Mev Geth auction and there would be different parties along the way that would essentially compete for their right to be included in a block and we can get to the the transact info in a

second but like this competition basically meant like net less Network congestion because you didn't see those bot spammers and then less centralized station so it really did make it mitigate those negative externalities of Mev and miners that used Mev Geth got I think over 100 APR increase in rewards and so it was pretty um lucrative and I think 80 to 90 of miners are running this client and then now in a proof of stake World they upgraded that to Mev boost which we can get into now if if you'd like yeah absolutely so essentially you know flashbots was this entity that kind of like was created to develop ways to like

mitigate the negative externalities of Mev and they kind of created this system called Nev boost so yeah love to dive in there kind of what that system is and especially like that transaction flow you made a great a great image here that kind of highlights how this transaction flows like what it looks like and I'd love to share screen here uh just the audience can see what this looks like so here's uh sharing the screen here here's this transaction flow so if you could just like walk us through this what each of these parties is responsible for doing and kind of how the system breaks down certainly yeah so it starts from the user they basically have a transaction intent saying I want this transaction

included and essentially it sends out an RPC which is basically um communication basically saying I want this transaction included and that either go is routed through some sort of public RPC infrastructure and goes to a public Med pool where like anyone can see the transactions that people want included or it goes to some private RPC service and we can get to the concept of exclusive order flow later but going from the the public mempool essentially uh goes through the first to people called Searchers which basically take these transactions and order them into bundles that extract Mev um and essentially they can then bribe

the block Builders the next entity to have those bundles included conditional on the Mev opportunity they that they they are looking to capture and essentially the they profit the spread between the bribe that they give the block Builder and then the Mev that they were able to capture the next entity like I said is block Builder so they're in charge of taking those bundles from Searchers and then any other transactions that maybe there wasn't Mev um opportunities involved they take all of that they try and basically produce the highest value block they possibly can um and then they in the same way as Searchers then pay um the validators essentially a cut of

the revenue that they were able to generate one from the search of broads as well as any other opportunities from transactions to be included and they they make that spread and then between the block Builders and the relay or in the validators is the relays which is essentially just like a filter mechanism so they ensure that the blocks themselves are valid and then they rank them based on economic value within the blocks and how much they're willing to pay um and then um from there you have validators which communicate with uh either multiple relays or a specific relay of their choice to get the most profitable block header that they can find and then they

validate and finalize that block on chain um and like the relays are sort of the entity that's most concerning when it comes to censorship because of that filtering like because they're able to filter they can basically say like we only want blocks that are of fat compliant um and sort of that's where a lot of the contention comes from when it comes to censorship um but I yeah if you have any other questions on sort of the the flow um the different actors in the supply chain yeah definitely ask away yeah I'm curious so so the private RPC is the only uh I guess step in this equation that's going to be skipped is

the Searchers so it just goes straight to the block builders that makes a lot of sense but then how does all of this Mev actually end up into people staking eth like if I'm staking eth with Lido how how do I get my yield how do I get my Mev and my tips I'm not sure if you're asking specifically about the exclusive order flow but in general how it goes to the validators is like I said you have Searchers that basically brought the block builders that have their transactions included then the block Builders brought the validators or at least pay the validators based on the value that their block provides and sort of that value because um because of the competition between Searchers and between block builders that like spread is going to be

minimized and so essentially that's like capturing Mev and bringing it to the validators with not 100 on the Mev but it's pretty close to it given that there's competition at each of these levels okay and on the same vein is there like sufficient competition right now like is it is Mev boost Central censorship resistant or would you say that there's like a lot more work to be done on that front yeah that's a good question I think at like the Searcher level I think it's definitely there's good competition because like a lot of people want to extract Med for themselves and so the Searchers definitely there's a lot of competition um one of the issues I see with the

design of Med boost um is sort of like the block Builder because um essentially they can see all the same transactions a search or can which is kind of a problem and I can also see the bundles and the transactions in the bundles that are sent from Searchers so block Builders really wanted to they could front run the Searchers basically see the mvv opportunities and capture it themselves um so I wonder is this this happening right now I guess not but I wonder because there's really nothing stopping them other than maybe if block builders start doing this and Searchers will stop sending their bundles to them but if block Builders can therefore make better blocks because they extract the Mev

opportunities and not searchers maybe that's the direction things go I'm not sure so that's sort of one problem of contention and then the relay is sort of its own issue so you obviously you have like five different relays which we can go through which are flashbots manifold blocks route block chart actually is three of them Eden and block native and this competition like between the relays is interesting because I mean we'll get to the data later but essentially um flashbots is the only relay that is permissionless meaning that any block Builder can send them a block whereas other relays aren't permissionless so basically you have to be on a white list

in order to have your your block on being sent to the relay and flashboss is also an o-fac compliant relay and so they're censoring um and because these two factors um like flashbots is usually building the highest value blocks with their relay I think they're being used 80 of the time which is definitely a problem um because of the censorship um so really what we need to see is like more a combination of permissionless and um non-censoring relays I think we just got one from Builder

0x69 is one of the biggest block Builders he he just built a new relay that's both permissionless and non-censoring and so I think like the relays is definitely the biggest point of contention when it comes to censorship and I think there just needs to be more competition more open source nature when it comes to these relays and I'm excited to see sort of what the future holds because you know a lot of people are complaining about the censorship and I think there's a lot of ways in which we can mitigate it at this level it sounds like the the process of nav boost itself is inherently not censorship uh prone to censorship it comes down to this relay section would you agree with that

yeah so it comes down to like relays and then the interaction with the block Builders and the relays because you know like I said the relays are sort of the filter so they explicitly choose um like which blocks they want and they're going to choose of fat compliant blocks um but then there's also block Builders I need to build those blocks so they need to also censor if they want to be included in the flashbots relay for example and so yeah because the relays are essentially filtering and choosing of that compliant blocks and that flashbots is both of compliant and permissionless I think that that's sort of yeah what's contributing to the

censorship would you say that uh centralized exchanges like because they run a lot of validators do you think that they're a threat to the censorship of ethereum or do you think for them it's in their best interest to not sensitive transactions and and avoid a hard Fork if it eventually did come to that I mean it's definitely it obviously depends on their jurisdiction like are they in the U.S did they see like do they need to be of fat compliant do they think that they need to be of fat compliant I think that's a that's a big issue but I think beyond that I think it's definitely in their best interest to not censor well well to one opt-in to Mev boost because they get an increase

in validated rewards but also two to not censor because non-censoring blocks just from the fact that they get more transactions included should therefore lead to higher rewards um so just from like a profit perspective it's obviously better but I mean exchanges make money because people are buying coins that at least are perceived to have value and if all of a sudden like each value drops because it becomes some sort of censorship chain well that's obviously bad for the exchanges in turn and so I think there yeah there's definitely a lot of value and these exchanges like trying not to be censorship prone but I mean we'll see a lot of these

I mean it looks like um well binance first of all has finally opted in half of their blocks it looks like to MVP boost and are choosing flashbots as their majority relay um but yeah I mean I'd love to see how this goes because a lot of them are just producing vanilla blocks which I'm not sure if they're um censoring or not which is sort of also an issue um but yeah I think they go in the direction of non-censoring and extracting as much value as possible that that makes a lot of sense now for the people who are listening on Apple or Spotify I think it'd be helpful to maybe walk them through a transaction and how

it would all look like can you do that on basically if it's going to a public mempool but then also if it's exclusive order flow and kind of an example to to give the The Listener a better understanding for where the threats lie for exclusive loader flow yeah definitely I mean it's pretty simple when it goes through uh public RPC so yeah you have your transaction intents goes to the public mempool um and then if there's an MVP extraction opportunity a Searcher sees that transaction and then extracts the Mev but if there is an Mev opportunity just just go straight to the block Builders who are going to include it in their block and then from there like it goes through the relay on whichever block

either has the highest value or highest value within a relay of a validator's choice well then that block gets included and your transaction gets included um if let's say like your transaction is like a sensor transaction so you come from a list let's say you use tornado cash and your sanctions well what's how that's going to work is you go on the public mempool Searchers might pick it up if there's an muv opportunity and then block Builders will depending on if the a block Builder wants to build a nofak compliant block or not well they'll see your transaction and they'll include it if they don't want to be compliant or if they do they won't include it

and then yeah it usually takes because there's 40 well we assume that there's 40 40 of blocks that aren't being censored it's going to take on average two and a half blocks for your transaction to be included which really isn't that long it's like 30 seconds um but if we see more adoption of that boost and the flashbots relay still has the the highest market share there then that could be more of an issue you could have to wait longer but that's sort of how it works and then yeah we can definitely get into exclusive order flow So that obviously depends so exclusive order flow to Define it is essentially transactions that a subset of Searchers

and block Builders can have access to that others don't and that's what makes it exclusive and essentially because of this um you'd think that either these Searchers can extract more MVP the block builders that have access to it can build higher value blocks which is sort of a centralization force but it's also like there's an incentive there to have exclusive order flow because you can essentially extract more Med than other people can and we're sort of seeing exclusive order flow emerge um as like a lot of Protocols are trying to extract exclusive order flow so the biggest we've seen so far is manifold

which is one of the bigger players in the The Meta space but essentially they're trying to have transactions routed through their RPC so that they explicitly can either extract the med opportunities themselves or block Mev opportunities from the end user and if they do extract Mev rather than not ending up in the validators hands that it goes back to the user and so yeah exclusive order flow I think is going to be a pretty hopped Hot Topic throughout the next six months to the next couple years because I think that's sort of the next place in which people are competing because they're able to

essentially front run this Mev boost um design because if I just send it to this the private RPC for exclusive order flow and never like sees um these like open source Searchers or Builders like it's sort of once again like a dark forest in its own place and I think yeah we're going to see more people compete for their right to have exclusive order flow and I think we're going to see um what looks similar in sort of Trad five venues where you have payment to order flow and so you're going to have entities that are willing to essentially pay users to have their order flow go through them and maybe they extract Mev or other opportunities that way and I

mean I'd rather have an MVP boost is on because all the mov opportunities are are open source they're democratized anyone can extract them whereas if you have some sort of exclusive order flow that's obviously a centralization risk so there's sort of two sides of the coin where you're incentivized to have exclusive order flow but that's obviously really bad for the chain in general if you can't tell we love data here at block reach research and chain analysis the leading blockchain analytics company shares this passion with us we use data to extract Alpha and find the next thing coming in defy but chain houses is doing the gritty work and building trust in blockchains to onboard the next trillion dollars of capital into the industry we need to

grow safe consumer access to cryptocurrency and promote more Financial Freedom with less risk chain analysis has some of the most comprehensive and reliable data in the space and they use this data to power a full Suite of their solutions that can be utilized by industry professionals Best in Class training and certifications are also led by Chain Alice's and some of the brightest Minds in the space if you haven't heard of chain analysis you gotta check them out and we'll link to them in the show notes this it seems like a perfect opportunity to kind of segue into you know you mentioned manifold and how they're they are creating tools for protocols to use uh and secure our PC and open Mev I'd love to hear a little bit more about what they do and kind of how that kind of creates this environment for where it

might be beneficial to protocols themselves to to Route this exclusive order flow yeah definitely can go into more detail on manifolds so yeah they have two products which are secure RPC and open Mev and they work um sort of in tandem with each other so secure RPC is their RPC service so essentially like a user and application when you want to send a transaction the RPC will be routed to them so that's sort of where we saw the exclusive order flow um within the transaction flow we saw earlier and then open Mev is like a service built on top of this and it's basically allows protocols to recapture the Mev that gets created through user transactions on their platform and then

that either gets like distributed back to the the users or it gets distributed back to the protocol revenue and we've seen Sushi swap integrated with openmov so now any trade on Sushi swap can basically use openmov and they specifically design sort of like an auction based engine for bundling trades so you can think of it similar to cow swaps Coincidence of wants um and then open Mev can basically use secure RPC and whatever you unique way to help like the Mev of that specific protocol So Sushi swap like that sort of Coincidence of Wands type Style Trading

is perfect for Designing mov around like specifically how Sushi swap is designed but if a different protocol is designed differently wants to sort of mitigate or extract and maybe for themselves in a different way they're going to design a different system which is definitely a unique and exciting in its own way but obviously as we said before this is a centralization risk but in terms of like manifold's perspective for them there's sort of a flywheel and that like the more essentially transactions they can route through secure RPC through openmuv they're able to essentially build the most blocks because they're also a block

Builder build the highest value blocks which means they're going to be more likely to be included and then from there essentially other protocols can see hey they're extracting this Mev and is coming back back to Austin our users we're going to Route our trades through them and it becomes a flywheel or more more Protocols are more likely to use their exclusive order flow and then manifold is able to build higher value blocks and generate Revenue based on that movie they extract as well which is super interesting so essentially it sounds like a manifold has created its own private RPC so it can create this environment where it can capture this exclusive order flow and then it created this uh

like an auction system where it can then take these its private order flow and mix it with the public Med pool to create higher value blocks and because they're having they're picking from a larger pool of transactions right you know if there's a massive trade to purchase eth on Sushi swap right then that would that would definitely create the opportunity for Mev and they can again if this was coming through a private route then they have the ability to use this trade when no other Searchers do so it definitely makes sense it's like all right mev's inevitable let's kind of create this environment where we can capture it and then give it to essentially hand it to the protocols and now it's on the protocols to say hey do we want to give this back to our users like what do we want to do with this extra value so it's

kind of a cool it's to me it's really fascinating that they've like accepted that this will exist and kind of like trying to repurpose it and allow protocols to have the option to go and and repurpose this map and maybe give it back to the users uh and the flywheel that you mentioned is like super intriguing right like more private order flow leads to creating the ability to have more transactions that can create higher value blocks uh and then once you know the protocol starts seeing this like hey like these this is a huge opportunity and it's only growing that kind of like it's like this positive feedback loop more more users will want to jump in here uh and kind of you know participate in this so yeah it's really cool to see them capturing this but you know I'd love to hear a little bit more about

like a couple other players in this space I know that you mentioned eat in blocks route and block native uh you know don't want to dive too deep on here but if you can just kind of like briefly mention the services that the three of these offer and it'd be great to have a recap there yeah so the biggest entities in sort of the Mev space um they all run their own relay they all build their own blocks as well um so just keep that in mind but yeah the the three like other entities that we haven't touched on are Eden Network so it's like similar manifold that has like a suite of products they have their own private RPC that tries to like minimize Mev for their users um and then you have blocks route which

um is trying to essentially increase the scalability of blockchain networks through like they have basically their own servers that are super high performance and they're so people use them for like mempool data and like direct transaction routing things along those lines and so it made sense for them to get involved in sort of the Mev space and then you know block native which is sort of in a similar vein like a real-time data platform for blockchain blockchain transactions uh focus on ethereum and like you can look at them to gauge like gas prices like simulate transaction execution like what that would look like and so like in a similar vein it made sense for them to get

involved in the Mev space um so yeah they all run relays and build their own blocks as well awesome so now that we kind of got this like uh we gotta hit all the the important information on like what this space looks like what MVP Mev boost is and how the transaction flow Works I'd love to get into my the most exciting part to me which is the data awesome so I'm sharing my screen here uh and I'd love to dive into you know I think like the one of the burning questions people probably have is okay so Mev you know we hear all about it we understand how to capture it but what is the reward size actually look like uh in your report you you noted that about 27 of staking words come from Mev so if you could walk us

through these this validator reward chart here that'd be great yeah definitely so essentially this is taking data from the Block rewards so essentially um transaction fees that go to validators that's the block reward and then potential Mev is um how much like the relay is reporting their highest value block to be paying um for any like validated block and so I say that's potential Mev because relays can lie about that number if they wanted to but obviously if they lied too much people will stop sending blocks to that relay invalidated will stop choosing that relay and so they're incentivized to be honest but I mean we can see that

huge Spike on I think that was October 15th because manifold's relay was going out of control it was basically saying there were much higher higher payments for blocks than they really were for about 12 hours but they they fixed that issue so looks like things are fine now but if you yeah you take out that entry uh essentially 20 of the staking rewards have come through Mev um and then like per day the amount of Mev extract on the average has been 119 throughout the the validators which I mean obviously shows that there is an incentive if you're a validator to opt in to emmy-boost and Achieve these extra rewards

um because what that's a 37 percent increase in your APR from staking which is definitely nice but yeah that's what this represents showing well we know Mev a cruise to the the validators but what does that actually look like compared to just the general block reward so in you know the depths of the bull Mark are excuse for the depths of the bear Market we're currently in uh you know it is it yes we're seeing around you know 20-ish percent uh of staking rewards be generated from Mev uh was it fair to think that in a bull market this would be uh become like an increasing percentage of staking rewards I mean my thought process here is kind of more transactions will be occurring on chain

In the Heat of a bull market and with like a lot of that being through dexes uh and like I'm thinking more transactions means more opportunities to reorder Tran to like reorder add remove transactions and create mbv opportunities is that something you would agree with or am I kind of off base there yeah it's definitely good um there's definitely an interaction between like the block reward and how many transactions there are but I do agree they Alec and definitely in a bull market Mania you're gonna have a lot more speculation on dexes there's going to be a lot more opportunities for Arbitrage for sandwiches Etc um and so yeah I do agree but it also baked in this question is like when to get a new bill around what when is that

and do we have sort of a thriving roll-up ecosystem where maybe those specific Roll-Ups are actually extracting Mev themselves before it goes down to layer one um so yeah I mean obviously that that could detract from the amount of Mev that's actually extracted the base level if most of the transactions and the speculations happening on Roll-Ups so that's like an interesting question to think about as well right yeah that's a great point that you know if a lot of this uh a lot of transaction activity really does shift to l2s like it likely will in the near future um it'd be very yeah it'd be very fascinating especially since a lot of these l2s still have a pretty centralized sequencers you know this

creates massive opportunities uh for the the entities that are running these l2s but I'd love to you know keep pushing along through the data here and this chart we had our sharing now is kind of validator participation by relay and as you can see you know right when the merge occurred there was like a very low percentage of validators uh for the percentage of blocks that were produced through Mev boost and as time has gone on that that number has significantly increased right so you know about a couple days in we're around 20 percent but now we're up to more around like 60 60 or so percent um you know this is a clear uptrend in the post-emerge environment and do you think this kind of keeps continuing uh

will it ever reach 100 and if so like what are the implications of that yeah that's a good question um I do think it'll keep trucking upwards I think most of like the move we've seen as the biggest we've seen so far I don't think it'll eventually get to a hundred um I mean for the same reasons why it was kind of low at the beginning you have some validators that are just like stick their eath like haven't even thought about it don't like don't even know how to connect to a relay there's definitely some of those entities out there that are staking their eat that way but I do think eventually it'll probably get to 90 Plus um in terms of people that are opting into Mev boost simply because you're

getting more rewards and like like we said before like if there is some sort of boat run Mania in the near future like those rewards are going to be very significant and so there's going to be a lot of incentive to opt in but yeah like are definitely more interesting interesting question is what happens if we get to 100 or close to it um I think the good is obviously like any V boost works like you get more um like we said more rewards as a validator but also it brings complete transparency to the Mev that's being extracted because we can can see it through the process that it goes through which is obviously really good it's going to minimize the negative

externalities of Mev as much as possible obviously the bad is well what does that like look like in terms of the percentage of like relays chosen so like we talked about before if if we get to let's say 100 percent and 90 percent of those blocks go through flashbots relay well they're going to be censored and what does that look like um I think it's fine because as long as you have some blocks that aren't censoring then any sensor transaction can get through they just have to wait but as you climb higher and higher and into that those numbers like at what point does it become consensus that okay we do need to censor I don't think that's ever

going to happen but obviously it becomes more of a an issue and sort of a thought point um so yeah that's sort of what it would look like once we get to the those higher numbers but I expect that we see more relayed diversity going forward yeah and just so people uh don't get scared listening to the idea of that because there's a lot of unknown I'm I'm curious like ethereum's trying to implement proposer Builder separation so this whole Mev boost deal is actually an interim solution correct yeah that's a great Point um yeah this process in general will be enshrined into the ethereum protocol and what you said as PBS and then it's going to remove the need for the Relay because the system itself can filter through the

blocks which will definitely be a big plus when it comes to censorship and along those lines like flashbots also building a different solution called Suave which they haven't released like details on which is apparently like an encrypted Mev aware mempool and so maybe that I I think that they believe that that will solve a lot of the censorship problems as well so yeah I definitely don't don't want to Hype it up too much okay and then uh we've got an image on the screen here for the people who are listening on Apple or Spotify and it's just the percentage of the relay Market that's owned by entity and it looks like flashbots is just around 80 percent market share why are they so dominant and do you expect to see more Builders

like uh Xerox 69 that you mentioned earlier in the episode kind of spin up their own relays and uh make the market a little bit more Diversified yes we touched on it earlier but it's definitely good to dive in that flashboss is the only relay that's permissionless meaning any block Builder can send them blocks whereas the other relays you have to be whitelisted and most of the time those whitelisted block Builders are themselves on top of that flashbots like they they're running three block Builders right now and those three block Builders or two out of the three are like the highest value block providers um or block builders that we've seen and so

the combination of those two I've sort of driven flashbots to be the most used but yeah like you said if we get more relays that are permissionless and those those relays are also non-censoring those will one include as many blocks as possible and therefore are more likely to have blocks that are higher value um but also um they're nonsense or yeah they're non-censoring as well and so the blocks are going to have even higher value than other blocks that are censored and so if we get yeah especially a large swath of relays that are both of those categories and I think flash watch dominance will definitely go

down and a lot of censorship concerns will go down and so yeah and taking a look at the Block Builder market share here uh again you know this is becoming a common theme we see flashbots dominance so you know on the screen we're showing a chart it's a pie chart and it kind of breaks down the Builder market share by each block Builder so flashbots has about 52 percent of the market share with the next largest being blocked route at 19 and then in third we have blocks Builder block Builder 0x69 an anonymous Builder with about 10 of the market share so again yeah I we keep seeing a common Trend here in flashbot's dominance

um and it's I guess it does make sense that you know if they have the most popular relay it's likely that you know they're feeding themselves these blocks is that the case yeah so flashbots is fleeting or feeding themselves like they're on relay their own blocks but they've announced on Twitter I think a couple weeks ago that they're gonna start sending their blocks to other relays as well as long as they are permissionless like I said and so like that centralization function where flashbots has like the highest value blocks and then they also send to their relay I think that's gonna alleviate one slashbox are sending their blocks to other permissionless relays how do you feel about liquid staking

derivative protocols like they have very much so grown in prominence I mean Lido has what 32 market share over over the uh the the or the totally staked so and then there's coinbase who's launching a derivative and then you have you know rocket pool stake wise there's a bunch of different solutions so why haven't they fully opted into Mev boost for all the blocks that they're attesting to is there is there a reason for that you think they'd want to give their users the highest yield that is a great question I wish I knew the answer to it's funny because Lido like on governance specifically voted so that their their validators should opt into MVP boost um because obviously gets the highest

rewards for the protocol which is good for everyone and so I don't know why they've had such a a slow um and shorts uh like opt-in to MVP boost I think the numbers are a little better now than when that data was sorted I think they're at um like 72 percent of their blocks are coming through MVP boost as opposed to um like 40 uh which is definitely better but yeah I think it's because they use like a pretty diverse set of validators that I think most of the validators are opted in and a couple of them are probably either like figuring it out or don't even know that they're required to like there's definitely a lot of just

probably communication issues and so I expect that number to be 100 within a few months uh the same goes with rocket pool I think they they had a similar thing as well where they're basically required to opt into Mev boost um and then we're also seeing a trend with the exchanges starting to opt in little by little so again the binance number there is increasing so they have I think over 50 of the blocks now are opted into MVP boost and then coinbase is like very slowly ticking up um and so I think like we said before it's kind of like a slow and gradual over time more people are going to opt in because like they're sort of figuring out how to and also they extract the

most profits they can that way and so you're just incentivized to do so that's really cool so I guess now that we understand that Mev is kind of being democratized through Mev boost and giving access to you know people who don't have the expertise to extract it the returns um would you say that ethereum is more censorship resistant after the merge than it was before the merge like are we in a better place now or is it kind of like we're in this rough patch right now and we're gonna be really decentralized sometime soon in the future do I think we're better off now than we were in proof of work no because right now like you said we're in a rough patch we're sort of figuring things out um and just the fact that like these

lfac compliance came at the right time when it came to the merge right um in terms of okay like these entities sort of realized hey I might need to be compliant so I think it was sort of the timing on that that made things more of a problem at the moment I don't think it's 100 necessarily because of his proof of stake versus proof of work although validators are like entities that people know and a lot of them are designated in the U.S um and so yeah that's definitely contributing but I think in the long run like obviously no one on ethereum wants it to be censored so I think there are definitely a lot of people like in the community big actors that want to see and not be censored there's just a lot

of people in positions that feel like they sort of have to censor and as long as we we continue to to design systems that are censorship resistant and not only should you not choose the sensor but that you can't censor I think once we have systems like that like ethereum is going to be totally fine from the censorship standpoint yeah absolutely I agree and just a closing question that we ask all of our guests and you're our first guest so we're going to ask all of our guests um what's one lesson that you've learned in crypto that you had your mind set on that you thought you were right and then you realized in the end that you're actually wrong and what'd you learn from it I think I know your answer but uh anyways yeah this one's pretty obvious

with me it was Tara I was pretty blunt or like set on a decentralized stable coin that was like scalable and decentralized which was impossible to build and I thought um at the very least like they had the best model and they had a lot of applications around it that were essentially going to make make it robust and I thought adding Bitcoin and other assets that's collateral was going to take it away from what was obviously a vulnerable model into something more robust but obviously now looking back learned a lot of lessons in terms of sort of the the cognitive dissonance and a lot of the

sort of biases that I was prone to at the time and yeah it was one of the biggest lessons of my life and glad I went through it because you know I'm definitely a lot more aware now and better off so yeah it's definitely biggest mistake I've made but yeah onwards and upwards couldn't have said it better myself onwards and upwards I was also a Terra Little Bull so I'd be lying if I uh didn't didn't admit to that but hey Westy we really appreciate having you on or you coming on uh do you mind telling the audience where they can find you yeah nothing can find me on Twitter at Westy Capital um and then now you can find my research at blockworksresearch.com definitely check it out great thanks for coming on

appreciate it all right there is a lot to unpack there Westy just dropped a ton of knowledge on us Dan what do you think about Mev as it relates to censorship yeah I think that's a great starting point um really loved how he kind of labeled the relayers as this like filtering mechanism uh and ultimately like that's where this censorship layer resides it seems so um you know it is a little bit concerning to me right like I guess I'll post the question to you like why do you think all of these uh like while all these block Builders are sending or using the same relayer and like and like it makes sense why these relayers are censoring in my opinion like if they're dominant out in the US or a country that mandates censorship like they don't really have much of a choice if they're

an actual company as opposed to like this a non-builder style um but yes I guess I posed a question to you like why are the block Builders and validators choosing uh blocks from these relayers yeah I think it just comes down to like what you said where they're actually domiciled but I do think it's worth highlighting that this is a temporary thing you know there is PBS on ethereum's roadmap how long that'll take I don't really know but you know we saw Builder zero six zero X six nine uh kind of Open Source a new relay that's open to anyone and no one has to be whitelisted so I think part of the problem lies in you know where you're domiciled and then also just getting a more competitive Builder and relay Market put in place so that way there's competition amongst uh all the different

uh sources and I think you know the merge just happened a little over a month ago so I think that will continue to see this decentralized over time yeah I think it's definitely too early to start waving the white flag and admitting to feed on decentralization here uh you know of course those are the topics that are gonna get thrown around Twitter just because that's what's going to go viral right but um you know it I think it's it's a concerning thing to keep an eye on but in the current state like you know we're it's still a grind towards decentralization and that's like that's just how we operate in D5 right like we have the end goal we need to keep that in mind and it's about building building to get to that end goal yeah 100 agree and I think almost the more concerning point is the exclusive

order flow it is a little bit scary to think about like a block Builder that can skip transactions from the public mempool and send them directly to themselves and then all of a sudden they have greater Mev opportunity and then they win every bid uh that's kind of where I get a little bit more concerned uh but I mean it's still too early to really see how it pans out and at the same time if they would do this it would kind of Ruin ethereum's main value proposition which is decentralization which would weaken the value of the chain and then ultimately injure the actors who are involved in this block building process so economically the incentives don't really make sense but uh again I mean ethereum this is a temporary thing and over the next two two years or so I think the problems will get fixed exclusive order flow is a

great a great another point to flag I like I only expect this to grow uh over the coming of the coming months and years I think the I like why it's attractive to protocols is right like you could if you can capture this map yourself and then return it to your users like that makes you more attractive to users and right like you need to get tracks and you need users so how are you going to incentivize that and throwing Back Rewards to these protocols makes a ton of sense now that definitely creates a centralization risk right like currently a manifold has their open Mev platform that is doing this through their secure RPC relay um or excuse me there's a secure RPC platform and this is like that's where the bottleneck is because if they have this super attractive platform that

creates this flywheel effect and continues to get more traction then they are the centralization risk because they have this all this power where all this order flow is coming in um and it like you know it's it's like feeding off itself it only gets stronger because they can make better uh more Mev filled blocks uh so like I understand why it's really attractive but it would be great to see like more players populate into this space but even then and like it's hard like it's only attractive if all these private pools have all the private order flow in one spot right um so I don't know it's like how do you build a system around this it becomes the ultimate question because it seems pretty inevitable what do you think about like right now it's what 35 of

blocks or vanilla blocks meaning they're not using Mev boost so do you think that kind of stays there do you think it continues to grow uh or and do you think that's like a threat to to ethereum and it's decentralization I do think this Trends towards a a higher participation rate in meth boost right it becomes down to it like this is a monetary game that we play um validators are have a purpose to make money and we you know Westie broke down how Searchers make money how block builders make money like everybody has their incentives here uh and blockchains are basically just incentivized games that's in the simplest form uh it's just a game theory so I I do think we're gonna see that the push to 100

participation in Mev boost uh solely because you you make more money uh through these blocks that are opting into this network as a threat to decentralization again this is like it comes back to that relayer conversation uh we just need to see more relays that are permissionless and non-censoring to solve this problem um and again like that's where there's this the incentive problem because relays don't inherently profit off this ecosystem um so I think it's just as the ecosystem as the Mev boost structure grows and matures then we'll have more participants that are willing to run relays and be block Builders and validators and kind of like you know if you have Westie kind of highlighted the the importance uh like how a lot of

block Builders also run a relay right because they can feed blocks from their block Builder to their relay uh and so that's kind of how the relay then becomes you know profitable to operate so I think we'll see more players in this space and as you mentioned Builder 0x69 is kind of like leading that charge and launch that permissionless three layers so we'll see we'll see if that Trend continues but yeah I definitely think we're gonna Trend towards 100 Mev boost yeah I'm curious too to see how uh the flashbot solution Suave that Westy mentioned actually pans out because I mean an encrypted public mempool sounds like like a really promising solution to a lot of the problems that we're discussing right now so that'll definitely be one that I keep a really close eye on how do you think about Mev

on l2s versus ethyl one as you know l2s continue to gain adoption yeah no that's definitely an interesting topic you know my personal view on this is like all right let's focus on l1s right into how and like let's let's figure out how to finalize this system before we start worrying about Mev on l2s right um you know there's still a lot of question marks around a whole different a whole number of areas around and emuv boost platform um you know as you mentioned proposer Builder separation isn't even officially enshrined within ethereum yet so to me there's like okay there's a ton of question marks here but at the same time like that will be a huge Market as uh ethereum begins to scale bull market reheats you know we're going to see a ton more users coming to crypto and

that's going to push people onto l2s so with more transactions occurring on these l2s yeah the the Mev Market there will only expand as these sequencers become decentralized yeah it seems like obviously everyone's talking about Mev on uh the layer one but I'm personally really excited about the upcoming Narrative of having Mev on layer twos because I think Mev and you know transaction tips are like the perfect way to design a token for an L2 because you can capture that and actually re redistribute that to stakers so that way you're not extracting from ethereum uh by you know making the native token of the L2 your gas token like starkware is doing but instead you can actually you know return some of that value back to the the token holders and give it an

actual function because right now the op token for example it doesn't have very much utility but I could definitely see a future where when they actually start to decentralize the process of of fraud proofs and and their sequencer I could see that being a really good uh value proposition for L2 tokens my friend that is an excellent take that's something I'm ever thought about I I love that idea because you know that doesn't take away from like you're not like extracting value from the ethereum base layer and you're just kind of like repurposing this opportunity to drive value to your platform wow love that thanks man appreciate it came up with it on the spot anyways uh I hope everyone enjoyed this episode of Xerox research we will be back here same day next week uh we had a

lot of fun and we hope you did too thanks for tuning in