Flashbots' First Product Mev -Explore: How to Quantify Mev and Make Ethereum More Fair and Transparent
Read Flashbots' First Product, Mev -Explore: How to Quantify Mev and Make Ethereum Fair and Transparent?
Original source: chain smell
Originally written by Leo Young
Last year, Flashbots, a MEV research organization, was founded to build an open and fair permission-free MEV extraction ecosystem.
Recommended reading:How does Flashbots mitigate the "miner extractable value" crisis as Ethereum's dark forest accelerates?"
After its launch, Flashbots rolled out a proof-of-conceptMEV-Geth, the goal is to build a permissionless decentralized MEV extractable mechanism that coordinates traders and miners.
Recently, Flashbots introduced a major product: the MEV browserMEV-Explore v0.
What is a MEV?
Before we introduce the product, let's review what MEV is.
The MEV is the total value extracted by reordering, interweaving, or reviewing transactions during block generation. Currently, MEV retrievable value on Ethereum is mainly carried out by DEFI traders and arbitrage robots through trade sequencing related trading strategies. Miners receive a small portion of the value of the MEV deal in the form of Gas fees.
Until Ethereum moves to POS consensus, miners will still have the most power to decide which trades to choose and which to rank. Miner Extractable Value The concept of Miner Extractable Value was originally developed in 2019 by Phil Daian and other authors in the paper "Miner Extractable Value".High Frequency Trader 2.0: Preemptive trading on decentralized exchanges, trade restructuring, and consensus imbalances". With the rollout of Ethereum 2.0 and Layer 2 networks, MEV exists in all smart contracts and is performed by a validator or packer. To broaden the concept range, Flashbots recommends changing MEV to Maximal Extractable Value, which stands for "Maximum Extractable Value." This change initiative also avoids the misconception that extractable value is primarily achieved by miners. As mentioned above, MEV is primarily executed and captured by DEFI related traders and arbitrage robots.
What is MEV-geth?
The purpose of MEV-Geth is to be efficient, to focus on the privacy of traders, and to be immutable. It introduces the concepts of "transaction finder", "transaction bundling" and "block template". Let miners commission "deal hunters" as third parties to find and rank trades. The searchers compete with each other to find the most profitable ranking of transactions, bidding to place them in the next block using a standard "transaction bundle" template. Miners use sealed auctions to evaluate bundled transactions and generate "block templates" with transaction sequence information for mining.
Source:https://github.com/flashbots/mev-geth
Mev -Explore is a real-time information panel and browser that displays the value of MEV, extraction value categories, network activity, latest MEV transactions, MEV Gas consumption and other related information.
The purpose of this product is to help the community understand the importance of MEV activity on the chain, preserving maximum network transparency through data presentation and making it available to all. This is an important step in helping the Ethereum network become fair and open.
The MEV-Explore data has been recorded since January 2020, starting with block 9193266. Focus on quantifying the value of MEV extraction on the chain, not the details of MEV in any one block.
Due to the limited combination of DEFI protocols being monitored, the parameters in the MEV-Explore panel are the MEV lower limit.
Data sources include the following agreements:
These are the numbers you should know about MEV
Flashbots found at least $314 million worth of extractable MEVs, or about 130 transactions, since the start of January 2020. Wasted about $4.5 million equivalent in Gas fees, which is equivalent to 4,500 Ethereum blocks.
The value of MEV is increasing rapidly. In January 2021 alone, the total value of Ethereum MEVs hit a record $57 million (47,600 ETH), and in January 2020 it was only $180,000, a 316-fold increase year over year.
Of the eight DEX monitored by Flashbots, Uniswap has the highest value of obtaining MEV, followed by Sushiswap and Balancer. It is important to note that this does not include multiple MEV arbitrage opportunities such as the "sandwich trade".
MEV trades are divided into three types: arbitrage, clearing, and arbitrage + clearing. Arbitrage accounted for 94 per cent of that. It is important to note that Flashbots does not currently cover all clearing protocols and does not include Maker DAO, a clearing mechanism that implements reverse auctions.
Of the $315 million MEV recoverable value monitored since January 2020, 88.5 percent was captured by DEFI traders and arbitrage robots, while the remaining 11.5 percent was captured by miners in the form of trading fees (successful or failed trades).
Since January 2020, the average MEV activity has taken up at least 3% of Ethereum's network space, and failed MEV transactions have wasted network resources equivalent to roughly 4,500 Ethereum blocks.
The MeVs (Mev-Explore) that are browsed are only a subset of the actual MeVs that can be extracted on the chain. The extractable MeV is a subset of the theoretical MeV.
Reverse the MEV crisis
The MEV crisis manifested itself on multiple levels: consensus imbalance caused by misalignment of miners' incentives, information asymmetry caused by unilateral trading between miners and traders, and instability caused by network overload. This is hard to fix, because any attempt to prevent miners and traders from accessing MEV profits risks creating a market that is rigged outside the agreement. As activities on the Ethereum chain have become more complex, MEVs have grown in size.
MEV value extraction is inevitable. The only way to avoid a MEV crisis is to make the value extraction process fair, efficient and trustless.
Mev-Geth and Mev-Explore V0 are useful explorations for Flashbots. Moreover, the road ahead is long and worth looking forward to.
Reference:
Quantifying MEV: Introducing MEV-Explore v0
For introduction of explore.flashbots.net
MEV-Explore v0
Flashbots Research Roadmap
MEV-geth
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