There was a time when gas fees were almost always in a very high state, and retail users were almost unable to buy and sell on AMMs because the fees were unacceptable. One of the causes of this phenomenon is MEV (Miner Extractable Value). MEV can be roughly understood as the profit a miner gets through using his or her authority in putting transactions into the blockchain’s block.
Although transaction fees have become somewhat more bearable lately, MEVs are still there, causing a lot of damage to users. One of the most popular solutions is Flashbots. So what are Flashbots, and how to solve Flashbot’s MEV, that’s the content of this article.
What are Flashbots?
Flashbots is a research and development organization working to mitigate the negative effects of existing MEVs, while avoiding the existential risks that MEVs can pose to blockchains, typically Ethereum.
Goals of Flashbots
The goal of Flashbots is to create a permissionless, transparent and fair ecosystem for MEV mining through three goals:
- Bring transparency to MEV Operations.
- Democratize Access to MEV Revenue.
- Allow Fair Distribution of MEV Revenue.
Bring transparency
Indeed, the topic of MEV is not for newbies, when it has begun to delve deeper into the structure of transactions, how miners work,… Moreover, as DeFi grows, the base infrastructure, and the operations of MEVs are also becoming more and more complex, making it difficult for ordinary users to grasp.
In this section, Flashbots will explore the negative impacts of MEVs, quantify the user harm caused by MEVs, and provide tools for developers to reduce the surface of their dApps to exploit. MEV. Finally, making the community more transparent in MEV mining.
It sounds a bit confusing, but in short, it is Flashbots that will help us know all the data of the MEV, just like a user looks up all the Ethereum information on Etherscan.
Solution: Flashbots built MEV-Inspect to scan Ethereum blocks and show MEV metrics over time.
Democratization of mining
MEV is only used by a small number of people, who can be large traders dealing off-chain with miners, or people who are really technically savvy. Flashbots will make it easy for everyone to connect to miners.
Solution: MEV-Geth is Flashbots’ answer. MEV-Geth creates a more efficient communication channel for miners and users to bid to include transactions in the block.
Distribution of benefits
MEV is currently generating a huge source of revenue, and this is throwing off the balance of interests among all parties, including miners, users, DeFi devs, traders. The goal of Flashbots is to redistribute this source of profit, to create a link of sustainable interests between the parties.
Flashbots’ products
Up to now, Flashbots has launched two products:
Flashbots Alpha
Before learning about Flashbots Alpha, we need to know another concept about Searcher. Instead of finding transactions in the Mempool themselves, miners delegate these transactions to another party, called a Searcher. These Searchers compete with each other to find the most profitable transactions and bundle them into a Transaction bundle.
Back to the main topic, Flashbots is created by 2 components: MEV-Geth and MEV-Relay with the following operation:
How Flashbot Alpha works
- Searchers collect Transactions.
- Searchers send Transaction bundles to MEV-Relay.
- Transaction bundles will be sent from MEV-Relay to MEV-Geth’s minners.
- Minners receive the Transaction bundle and process it in MEV-Geth.
- Minners select the most profitable bundles.
- MEV-Geth then compares the block that includes this bundle with a regular block that does not include any bundles. If it’s more profitable to have bundles, miners will process the transaction.
Only when the Searchers bundle is included in a block will the transaction fee (tip) be paid. Otherwise, Searchers doesn’t cost anything (i.e. no gas fees for failed transactions).
Flashbot Alpha will generate the following benefits:
- Searchers will bypass Mempool, avoiding front-run.
- Searchers will not charge a fee for unsuccessful transactions.
- Miners will receive additional revenue from the tip to put the bundle in the block.
- Users can make transactions without ETH in the wallet.
MEV-Explore
this is a dashboard about all data related to the MEV transaction. Questions like total MEV revenue, which DeFi protocol contains the most MEVs, how much profit DeFi traders and bots make from MEVs, etc. can all be found in MEV-Explore.
MEV-Explore interface
So what is the difference between MEV-Explore and MEV-Inspect?
MEV-Explore uses data collected by MEV-Inspect. MEV-Inspect currently includes: Curve, Balancer, Uniswap (& clones), Aave, Compound, 0x, DyDx. After collecting data, MEV-Inspect will decode and display on MEV-Explore.
Do users use Flashbots a lot?
Surely you have more or less thought about whether anyone uses Flashbots’ solution. According to the January 2021 report, a total of 19 Searcher bots have successfully entered the block. But by April 2021, the number of Searcher bots has increased to 600. In addition, below is a chart showing the number of Transaction bundles that Searcher bots have included in the block, showing that there is a lot of demand for Flashbots’ services.
Number of Transaction bundles landed
In the last part, let’s see besides Flashbots, what other ways to solve the MEV problem.
Solutions beyond Flashbots
KeeperDAO
KeeperDAO uses a hidden Mempool called the Hiding Book. Transactions, loan orders will be sent through, where Keeper bot will take profits through MEV through arbitrage trading or asset liquidation. MEV profits are deposited into ROOK treasury, users receive part of profits in the form of ROOK tokens. These transactions will be free of charge, avoiding front-run slippage.
SecretSwap
SecretSwap is an AMM on Secret Network. Secret Swap uses secret contracts (SNIP-20) to protect users from front-run MEV bots. SNIP-20s contracts are encrypted while they are in the mempool, preventing the extraction of the MEV.
Archer Knife
Archer DAO’s Archer Swap uses Archer Relay to bypass the Mempool and send user transactions directly to the project’s own MEV-Geth miners and Flashbots. ArcherSwap prevents front-runs, slippage and no transaction fees for failed trades.
Alchemist
mistX.io is Alchemist’s AMM, operating on the Flashbots network, allowing users to send transactions similar to Flashbots’ Transaction bundle. In addition to free transactions, users also do not need to pay fees when canceling orders.
TaiChi Network
TaiChi Network is a Private transaction service operated by SparkPool. User transactions are only visible to Sparkpool and not to other Ethereum nodes, preventing the MEV bot from being able to find transactions on Mempool.
summary
Flashbots is probably one of the effective ways for users to get access to MEV, and another part is to make the code open source for many people, the project can create their own bot, helping the MEV game become more equitable.
MEV probably will not be able to completely remove it, but can only prevent losses such as front-run, back-run through Flashbots, as well as the above options.
Source: What are Flashbots? Is this an effective solution for MEV?
– TechtipsnReview
