Nov 8, 2022
Skip’s State of MEV: JUNO
This article covers the State of MEV on JUNO today, including:
- Basic introduction of JUNO (for the entirely uninitiated)
- How much MEV is being extracted and how much is being paid in transaction fees to extract it, as well as other high-level stats on MEV capture (e.g. number of active MEV searchers, txs, etc…)
- Which bots / addresses are capturing MEV
- The strategies being used by those bots
- The protocols and smart contracts those strategies rely on and interact with
We obtained the data in the article by analyzing blocks 1 (October 1 2021) through 5,483,548 (October 31 2022). Here are the stats in a nutshell for readers who want a tldr:
- Total Juno Extracted: 6,250.88
- Total Transaction Fees Paid for Successful MEV Txs: 39.47
- Total Number of Successful MEV Txs: 9,277
- Percentage of Total MEV Txs that Failed: ~34%
- Total Number of Active Searchers: 4
- Earliest Block Height With MEV Capture: 3,524,186 (July 14th 2022)
Juno for Newbs
Juno is the first dedicated permissionless network for decentralized and interoperable CosmWasm applications in the Cosmos Ecosystem, allowing any CosmWasm developer to easily deploy and compose their Dapps with the rest of the Interchain.
CosmWasm is a WebAssembly-based smart contracting platform built into a Cosmos SDK module that allows chains to enable smart contracting capabilities tailored for their own unique use-cases. Today, the most widely used and supported programming language for CosmWasm is Rust.
For more introductory resources about Juno and CosmWasm, check out the links below:
- Juno: https://www.junonetwork.io/
- CosmWasm: https://cosmwasm.com/
High Level Summary of JUNO MEV Activity
Since the inception of the JUNO network, MEV searchers have extracted 6,250.88 Juno extracted and paid 39.47 Juno in transaction fees to execute those transactions (0.63% of arbitrage profit). All of this extraction has taken place over the last 4 months, with the earliest MEV transaction taking place in mid-July 2022 (see charts below for MEV profits over time).
The current MEV market on Juno is narrow though competitive: there are only 4 active searcher addresses which have collectively executed 9,277 successful MEV transactions since July 14th, 2022. Even still, backrunning MEV opportunities are usually extracted in the same or following block where the opportunity arises.
Of these 4 addresses, the two highest performers extracted the vast majority of profits (6207.6 JUNO or 99.5% of the total) and submitted the vast majority of MEV transactions (9016 or 97.1% of the total). The charts and table below give more data on each searcher address.
MEV Strategy Alpha
There are a variety of profitable MEV strategies used by the top searchers on Juno today, including two main execution techniques (smart-contract-driven vs account-driven) and a handful of routing / pathing strategies (single DEX arb, multi-DEX arb, stake easy liquid staking conversion, White Whale Flashloan arbs, TFM Router Arbs).
Routing Strategies:
- Single Dex Arb: A majority of profitable cyclic arbs on Juno today are single DEX arbs, meaning that all the pools swapped against to create a profitable transaction belong to the same DEX protocol. With JunoSwap being the first major DEX on Juno, having the largest liquidity levels, and trade volume, it’s no surprise that JunoSwap is also the DEX protocol with a majority of arbitrage captures.
- Multi Dex Arb: Other times opportunities require trading across multiple DEXs, creating profitable routes that swap through both JunoSwap and Loop Finance’s DEX.
- StakeEasy Liquid Staking Conversion: Some profitable MEV transactions use both bJuno and seJuno (two liquid staking assets on Juno) in two different swaps in the path. Instead of using an AMM to swap between the two assets, searchers convert between the two assets by executing conversion calls on StakeEasy’s contract.
- White Whale Flashloan Arbs: An emerging strategy, enabled by White Whale’s Flash Loan Vaults, is to begin an arbitrage route by taking out a ujuno flashloan for the amount needed to capture the cyclic arbitrage, execute the cyclic route using White Whale’s Flash Loan Router, and then pay back the flashloan, all atomically in the same transaction. In addition to the usage of flash loan vaults, as part of White Whale V2, there are AMM pools deployed on Juno controlled by WW that can be used to arbitrage alongside JunoSwap and Loop pools.
- TFM Router Arbs: Going one step beyond DEX aggregation, TFM has released easy-to-use bots, including an arbitrage bot, that allows users to be alerted when certain arbitrage opportunities arise via Discord and Telegram, linking them to TFM’s trading interface to execute the transactions. TFM’s DEX aggregator uses JunoSwap and Loop Finance, which are the same DEXs they calculate arbitrage opportunities over.
Execution Techniques:
The top two searcher addresses:
- juno1n8na8sx06dj90jwedg27cyy6ptqqkeyx8sv5m9 (contract)
- juno1nsuxjsp0zhfg23j4y8fzrxax493sqjjzhhec4s (contract)
execute all of their MEV extractions via custom smart contract routers that hold their funds and encode the logic of their strategy. When searchers execute their smart contracts, they feed in certain parameters such as which contract addresses, tokens, and amounts to be used in the current transaction to result in a profitable execution path.
- Generally speaking, searchers may use smart contracts to execute their MEV strategies for several potential reasons including: gas savings, obfuscating their execution strategy from other searchers, and increasing the speed in which they can submit a backrunning tx by pushing computation on-chain.
The other two searcher addresses:
do not use custom routers that only they can execute, but either:
- Chain multiple messages [swap, pass through swap, increase allowance, etc.] together in a single transaction to result in a profitable cyclic route, or
- Use the TFM Arb Router or the White Whale Flash Loan Router Contracts, pushing nearly all logic to their off-chain bots/systems instead of relying on on-chain calculations.
DEXs on Juno
Juno currently has two main decentralized exchanges that searchers are interacting with: JunoSwap and Loop. The top JunoSwap pools have significantly more liquidity than pools on Loop ($7.7M-$2.5M for the top 3 pools on JunoSwap, compared to the largest pool on Loop having <$120k). As such, a majority of swap volume on Juno is routed through JunoSwap pools.
- JunoSwap and Loop are both CosmWasm smart contract implementations of AMMs (automated market makers) heavily inspired by Uniswap.
- Both DEXs implement 2-asset, x*y=k curves, with a standard swap fee of 0.3% that goes to liquidity providers.
Skip + Juno + MEV
As of November 3, 2022, Skip is live on Juno Mainnet running on over 25 validators, with searchers submitting profitable MEV bundles every single day since launch! What does this mean for you?
- Searchers: Searchers can now bid in an auction for top-of-block bundle inclusion, giving centralized-to-decentralized exchange traders guaranteed block state execution for their order flow, and allowing for DEX cyclic arbitrageurs to be the first to backrun transactions that generate MEV opportunities. As a cherry on top, Skip’s infrastructure simulates submitted bundles to guarantee that if they end up on-chain, they will succeed (no more wasted gas for searchers or failed transactions that must be stored in archive nodes)! To get started searching check out our docs and join our discord to ask any questions!
- Validators: Validators can now accept MEV bundles and get paid in proportion to the MEV extracted in their blocks (thank you competitive markets)! Skip gives validators full control over how the payments they receive from the auction get split amongst themselves and the rest of the staking network. The best part is, signing up for Skip is dead simple, just go to our registration page and follow the instructions to enable MEV-tendermint on your node! If you’re still on the fence about MEV and/or Skip, come talk to us (we’re friendly), or ask any of your validator frens who have already enabled Skip about their experience (you can find a list of all validators running Skip on our new and shiny validator dashboard)!
- Stakers: Well… not much actually, just sit back and enjoy more staking rewards as searchers begin paying the network in proportion to the MEV they extract (instead of the previous 0.63% of profits they were previously paying)!
- Users: We know what you’re thinking… and no, you will not be getting sandwiched now that Skip is deployed. With Skip’s frontrun protection enabled on all Juno validators, searchers are not allowed to bundle with your transaction in a way that harms your execution! But that’s not all, soon you’ll be able to to route transactions through Skip’s infrastructure to leverage our simulation infrastructure (ensuring your transaction succeeds on chain) and preserve the privacy of your transaction until it lands on-chain!
Conclusion
The team at Skip is super excited to be deployed on Juno and working alongside a fantastic community interested in transparently and equitably tackling the question: MEV… wat do? As the MEV market matures on Juno and the broader Interchain, it is paramount that the Cosmos ecosystem works towards a future that both leverages the power of MEV to create financially sustainable decentralized systems, while recognizing and mitigating the negative externalities of MEV systems that prioritize short-term extraction over all else.
The Juno community has already set the bar high, showcasing how protocol developers, validators, and stakeholders broadly can come together and chart a path forward as a collective. Skip’s deployment on Juno allows for an open, competitive marketplace for top-of-block execution that provides privacy, frontrunning protection, and to direct MEV rewards back to validators and stakers as a whole. We don’t take a fee, and pass back 100% of rewards to the community.
Get started: if you’re a validator, you can sign up automatically here (5 mins) to begin capturing additional MEV revenue. If you’re a trader or searcher, you can get started using Skip’s active endpoints here.
An optimistic future for MEV across the Interchain has never looked so promising!
