The SUAVE details just dropped and there is some super exciting stuff to unpack.
SUAVE is a new blockchain that will create an open, more transparent and permission less marketplace for the block building process.
Currently flashbots is a very centralized service that has been criticized due to its censorship following OFAC’s listing of the Tornado Cash mixer contracts. This led to censorship in about 73% (as of writing) of blocks produced.
So let’s talk about some stuff:
- What is MEV?
- What is Flashbots?
- What is SUAVE?
- Cosmos’s cross chain MEV Market
- Manifold and SushiSwap
So let’s dig in.
What is MEV?
MEV stands for miner extractable value or maximum extractable value now that ETH is proof of stake and lacks “miners”. A basic example is a sandwich attack.
Say you want to buy some DOGE on UNISWAP. You place your order in Metamask (which is now monitoring your personal information) which forwards the transaction to infura’s RPC where the transaction is submitted to the mem pool. The mempool is a place where all the transactions get to hang out until they’re selected to be processed or rejected by a miner or a validator.
A validator that wants to profit from your purchase would buy some DOGE before they execute your transaction, execute your transaction next, then sell that DOGE, making your DOGE more expensive than you wanted it to be, woof.
This is also known as slippage or the movement in price from where you were quoted. This happens over and over again with many users. Users may not even notice what happened, but this raises issues where a small group of validators, api providers, and wallets can control the order flow of transactions and corner the market to make more profit.
This is similar to Robinhood, the free to trade platform. If you place a transaction on Robinhood as a day trader, Robinhood will sell that trade to a big HFT (high frequency trading) firm like Citadel who will use that information to profit off of your trade in a plethora of ways. The sandwich attack mentioned above is just one way but rest assured there are many more.
This “MEV” like experience also occurs on Wall Street. Big Wall Street firms pay top dollar for what are known as colos, or co located servers, see the documentary The Wall Street Code or anything by Haim Bodek. These servers are setup right next to the core matching engine of big exchanges giving them better execution for faster price quotes. They even argue over whether the fiber optic cable is laid straight or not since light travels faster in a straight line.
So that’s MEV for you in a few different flavors and as you can see it’s not isolated to the crytpo industry.
What is Flashbots?
Flashbots is a company that entered into the blockchain space inspired by the now famous “Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges” paper.
This paper introduced the topics of priority gas auctions and miner extractable value (PGA/MEV).
PGA is defined as “competitively bidding up transaction fees in order to obtain priority ordering”. They define the broader ability to extract value from the chain in unintended ways as MEV.
They described one form of MEV as OO (order optimization) by profiting from the order of transactions.
Enter Flashbots
To mitigate this MEV risk, flashbots introduced 2 primary products, the first for proof-of-work ETH and the second for proof-of-stake, the second also being more decentralized than the first, which is a trend we’ll continue with SUAVE.
- mev-geth + relay — go ethereum client fork to accept relayed transaction bundles and a relay endpoint for searchers, also known as “proposers” to submit trx bundles, here flashbots was the only party to put these bundles together as a “builder” to submit them to miners
- MEV-Boost — introduced a proposer builder separation to allow proposers to propose transactions and builders to submit profitable blocks for validation, again previously only Flashbots was submitting built blocks. They also added a commit reveal scheme leveling the playing field for validators as well as open sourcing the protocol to introduce more competition by enabling entities to fork the protocol.
These two products have been instrumental to maintaining the competitiveness and decentralization of Ethereum, which brings us to SUAVE.
What is SUAVE?
SUAVE is its own separate blockchain to further decentralize the mev reduction process, specifically the block building roll which is currently facilitated by a centralized API. It is an application specific chain in the sense that anyone cannot just plop an unapproved contract on the network which would take up unnecessary blockspace.
We don’t yet know how this chain will be validated, i.e., how the block validators will be chosen. ETH will be used as the native token.
SUAVE is to become the mempool and block builder for not only Ethereum but potentially all chains, relinquishing the need for flashbots to run their centralized API.
SUAVE will take this auction process and decentralize it in what I find to be a perfect use case for blockchain.
In comes the super cool part, they’re also saying they’re going to use Intel’s secure guard extensions which is a stupid big deal, let me tell you why.
Intel SGX
Intel SGX is a secure environment where a private key that is stored on the intel chip at manufacturing time signs the execution environment creating a proof that you ran a certain version of some code. The reason it’s hard to forge is that the private key is stored inside the device and is theoretically tamper resistant. So if you don’t have close friends at Intel it would be hard to extract that key for your own manipulation.
Avalanche is using this technology currently for their bridge service. They run an API with SGX and rely upon multiple parties to feed transactions to that API to be processed and signed in the secure enclave environment.
Again because the code execution is signed and verified, if everything goes according to plan, we can verify the code that the secure enclave is running and trust that there are no shenanigans going on because otherwise the digest hash provided would be different and easily spotted.
So that’s why SGX is a stupid big deal because it moves the needle from can do wrong, to really really hard to do wrong or what the more bold would call can’t do wrong.
Preferences
SUAVE also introduces the concept of preferences
A preference is a message that a user signs to express a particular goal and that unlocks a payment if the user’s conditions have been met.
These preferences are then put into an execution market where “executors compete in an auction to provide users with the best execution possible”.
Cosmos’s cross chain MEV Market
I would be remiss if I didn’t mention Cosmos’s now failed proposal for the Atom 2.0 whitepaper where they suggested a cross chain MEV market similar to SUAVE which would also help return value to the chains in which the MEV occurs as well as potentially the DAPPs then users.
Interchain Scheduler: The IBC economy is a patchwork of asynchronous
markets, introducing an enormous variety of cross-domain maximum extractable value (MEV) opportunities. This market can be made more
efficient, more secure, and more lucrative for Cosmos chains and their
users. The interchain needs a secure block space market to avoid off-chain
cartelization and more options for chains seeking to optimize the use of
block space.
This is super cool because Cosmos has the leading trust minimized IBC solution with finality in a few seconds between chains, though not EVM compatible.
Manifold and SushiSwap
I am seeing a trend where DAPPs are getting jealous of all the MEV that is going to these searchers, block builders and validators and in an attempt to return more of that profit to a community or directly to the traders themselves, Manifold Finance launched a product that does just that.
Sushi swap introduced SushiGuardRouterV01.
The SushiGuardRouterV01 implements MEV Protection at the protocol level for Sushi users. Profits from arbitrage (via backrunning) are collected on chain in a transparent manner. This will enable Sushi to generate and capture profits normally realized by arbitrage bots, in protocol. The profits are split with Manifold Finance for operating the additional infrastructure and maintenance required to operate it.
Conclusion
MEV will continue to be an issue, but it is interesting to see how dedicated the Flashbots and other teams are dedicated to leveling the playing field to keep DeFi as competitive, trustless, and private as possible.
