MEVpool: The Ultimate Solution for Managing MEV Challenges

Bitcoin Magazine

MEVpool: An Essential Solution for MEV

Miner Extractable Value (MEV) represents a significant risk factor within blockchain-based ecosystems. When originally envisioned, a blockchain was designed to provide incentives to miners or other consensus participants involved in transaction ordering, allowing them to earn revenue through initial block subsidies issued with every block, in addition to user-paid transaction fees that ensure timely confirmations.

However, these revenue streams are no longer the sole motivators driving miners’ actions. The blockchain environment has evolved to support more intricate contracts and protocols enabling the creation and exchange of various assets. These contracts are inherently open to anyone; as long as the necessary asset is available and the specified exchange conditions are met, any user can independently interact with these contracts or protocols to swap assets.

This situation affords miners considerable power, as they ultimately determine which transactions are accepted into blocks. Thus, they gain preferential treatment by being able to “jump the line” when engaging with these contracts and protocols. Such preferential access can present critical challenges, particularly as the complexity of contracts and protocols increases.

The growing intricacy of these arrangements exerts significant centralization pressures in mining. Miners can theoretically seize all available value, but they must first analyze the present conditions of these contracts. Greater complexity entails more involved and costly analyses, heightening the centralization issue for miners.

This dynamic is detrimental to censorship resistance.

Proposer Builder Separation

Ethereum serves as a prime example of MEV challenges. The extensive complexity present in Ethereum’s contracts has led to a substantial accumulation of MEV on the network, spurring various attempts to address the situation.

The Proposer Builder Separation (PBS) approach aims to lower centralization risks linked to MEV by differentiating the two roles involved in advancing the blockchain. In this model, Builders are responsible for assembling the transactions into blocks, while Proposers (miners or stakers) select the most lucrative block templates. The underlying concept is to permit centralization effects to impact template producers while shielding miners and stakers from it. If a competitive landscape for template production exists, the system should remain secure.

However, this strategy has not fully materialized as intended. The reality reveals a limited number of competitive Builders; when the most profitable template producers choose to implement censorship, it inadvertently becomes a reality for all miners and stakers opting to utilize those profitable block templates. Given that selecting the most lucrative template is economically sensible, this does not adequately mitigate censorship risks.

MEVpool

The MEVpool initiative, introduced by Matt Corallo and 7d5x9, represents an effort to adapt the PBS model for Bitcoin to effectively address censorship risk.

A key distinction between PBS and MEVpool lies in the fact that, in MEVpool, miners continue to have a hand in constructing the final block template. While they still outsource the selection of transactions that optimize MEV extraction—including those within the block templates they develop—this approach empowers miners to maximize their MEV share while retaining the discretion to include any transactions they choose. This contrasts with the binary decision mandated by PBS, which forces miners to either accept censorship for maximal profit or forego potential gains to avert it.

The proposal entails establishing marketplace relays to maintain orderbooks where MEV extractors can propose transactions along with the fees they’re willing to pay miners for inclusion in blocks. Extractors can define conditions under which payments are made for transaction completions, such as only if their transaction is the first to engage with a specific contract included in the block. The marketplace would accommodate both sealed and unsealed orders; sealed requests keep the proposed transactions hidden from miners until block finalization.

So how does this mechanism operate? Miners only require the hash of a transaction to include it in the Merkle tree while mining; they do not need the full transaction details until they achieve a valid block and are ready to broadcast it. Yet, they must verify the transaction’s validity, which is the role marketplace relays are designed to fulfill.

There are two methods to accomplish this. First, the straightforward option involves using trusted third parties as relays. MEV extractors would submit their transactions to these relay operators, while miners connect to the relays. Once connected, miners can request lists of sealed and unsealed bids from the marketplace, receiving the necessary hashes for the sealed bids. They would then utilize custom software to construct the block template. After achieving a valid block header, miners send the block—minus the missing information—to the relay.

The relay subsequently includes the complete sealed transactions, broadcasts the block, and later provides the miner with the full sealed transactions for broadcasting as well. Throughout this process, the MEV extractor’s fee is kept in escrow by the marketplace relay, which releases it to the miner after successful block verification.

This strategy, however, depends heavily on trust in the relay from both miners and MEV extractors.

The second method involves utilizing a Trusted Execution Environment (TEE) to manage the block template construction and encrypted sealed bids for miners. Miners would operate specialized template software and a Bitcoin node within the TEE. After receiving sealed and unsealed bids and finalizing their block, the TEE would sign an attestation of the block and provide the marketplace relay with a session key.

Subsequently, the marketplace would encrypt the sealed transactions and create a transaction for the miner’s fee payable using the session key. Once a valid block hash meeting the target difficulty is found, the TEE decrypts the sealed transactions, enabling the miner to broadcast the full block and claim their fee from the MEV extractors. Trust in the TEE’s security is essential for all parties involved in this scenario.

Final Thoughts

Ultimately, I believe the outcome of this setup is likely to resemble that of PBS on Ethereum. A limited number of large builders will create MEV-optimized templates, whose transactions are submitted to them independently rather than through the mempool. The MEVpool marketplace relays, in both configurations, require public broadcasting of fee information on submitted orders to allow regular users to accurately estimate fees. If dominant marketplaces manage to attract submissions that are not sent elsewhere while withholding fee information, it may adversely affect the broader user base.

Additionally, while MEVpool grants miners the autonomy to choose transactions outside the MEV-optimized subset, it remains vulnerable to large marketplaces using private transaction submissions to exploit their position. Those marketplaces could pressure miners into censoring alternative transactions through the withholding of orderbook data if no competitors possess access to the same information.

In conclusion, I do not perceive this as a definitive solution to the MEV issue; instead, it acts as a temporary fix or mitigation strategy for its most severe consequences. While it alleviates certain centralization risks, it does not eliminate them entirely.

This is a guest contribution by Shinobi. The opinions expressed herein are solely those of the author and may not reflect the views of BTC Inc or Bitcoin Magazine.

This article MEVpool: An Essential Solution for MEV initially appeared on Bitcoin Magazine and is authored by Shinobi.