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MiningDAO: arbitrageurs competition no longer hurt innocent | rhythm research about the etheric fang series three dark forest

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The negative externalities caused by the scramble for MEV have had a huge impact on the Ethereum ecosystem, and different solutions are being implemented step by step.

For frequent users of the Ethereum network, dark forests, run-ahead robots, and MEVs are no strangers. Vertigo has been presenting Ethereum's Dark Forest solutionKeeperDAO, details the secrets in the Mempool.

In 2017, the DEFI ecosystem was not yet mature and MEV was not a serious problem, producing only $1 million of MEV at Bancor and EtherDelta that year. With more and more different types of agreements entering the ecosystem, MEV is now at $500 million a year. On May 19 alone, the day of the crash, Flashbots helped miners make $4 million, so you can imagine how big MEV was that day.

There are three characters in the Dark Forest game, they are respectively the robot running arbitrage algorithm and algorithmic trading, the mine pool, and the organization fighting against the Dark Forest.

Robots use fixed algorithms to try to maximize their returns. Mine pools determine the order of transactions in each block, until recently the same default rule was implemented on the Geth and Parity sides. BloxRoute uses private transactions to avoid public trading pools, while KeeperDao coordinates by allocating MEV benefits within the organization. Today's MiningDao takes a "SmartPool" approach.

From "fairy fights" to mutual concessions

Usually the mine pool will run their own pre-start robots, and different robots "fight with the gods", resulting in a serious waste of resources and unstable consensus, such as the classic Solmonella, which snatched 120 ETH from the Ethermine robot.

By creating a completely transparent, all-fair, modular infrastructure, MiningDAO allows anyone with an Ethereum address to package blocks. Each block has a bounty on it, and the pool will pick the block with the highest bounty.

Image credit: MiningDao Medium

Specifically, the MiningDAO protocol is like an order book for blocks. The packer needs to deposit the ETH into the contract and lock up the warehouse. Before packaging, packagers sign an off-chain agreement that includes sealhash and a bounty on the block. The pool will select the block with the highest bounty and brutally calculate the nonce that encapsulates the block. Once the nonce has been calculated, the information will be communicated to the packer and the bounty contract, and the bounty will be transferred to the outbound pool. So essentially, as long as the MEV of the parcel is higher than the bounty, the parcel is profitable.

What are the drawbacks of Flashbots?

MiningDAO has a similar approach to Flashbots, but it has some advantages.

Since 65% of Ethereum blocks are now mined by the top five mining pools, none of which reaches 50% computing power, there is already a risk of centralization. But since Flashbot now routes 80% of the computing power in the Ethereum ecosystem, this is extremely dangerous for the Ethereum ecosystem, which needs a more decentralized solution.

MiningDAO's smart pool first ensures that miners can select blocks without knowing about the transactions within the blocks. At the same time, the block bounty bidding is open and transparent, which is fair, transparent and efficient for the block packagers (arbitrageurs), so the packagers don't have to customize their bidding algorithms based on historical data.

The future of MiningDAO

Since MiningDAO was just launched, the protocol was internally coordinated and supervised by a centralized coordinator in V1 early in the project. It will be gradually decentralized in future updates.

MiningDAO has already had 7 miners (pools) and 50 packagers (arbitrageurs) involved in the protocol in just 2 days, and the network has reached 600TH/s.

Although the ultimate winners of the Ethereum ecosystem will be miners, we will always see the day when the dark forest of Ethereum is illuminated.