Should we embrace MEV if we can't avoid it

On the evening of August 13, 2021, Huobi Ventures hosted a closed-door conference on MEV (Miner Extractable Value). Participants included: PIM team of Huobi Ventures, Xie Dazhong (Huobi Ventures), Harper (Huobi Ventures), Zhao Chuchen (Lidong Research Institute), Pan Zhixiong (Lian Wen), Deli (Automata), Yan Xin (EthSign), Yao Xiang (Shanghai Cutting-edge Technology Seminar/Ethereum Community Consortium), Kang Shuiyue (ACY), Zeo (ACY).

At the conference, Huobi Ventures conducted a review of its recently published research paper, "Building a Fence for the Dark Forest of Ethereum: A holistic interpretation of eight Anti-MEV solutions," followed by a meV-themed roundtable.

Eight anti-MEV schemes are explained in detail

In the first part of the closed-door session, Harper and Xie Dazhong from Huobi Ventures discussed their recently published research paper, "Building a Barrier for The Dark Forest of Ethereum: A panoramic interpretation of eight Anti-MEV solutions."

Huobi Ventures believes that the underlying cause of MEV attacks lies in the fundamental design of the blockchain: first, the mempool design of the blockchain, where all transactions are sent out, instead of being packaged directly by miners, they need to enter the mempool temporarily. Mempool contains pending transactions, and because mempool is public, anyone can listen to every transaction in mempool and every function called. This provides an attacker with a condition to listen for trade events. Secondly, the block time of blockchain provides execution time for attackers. According to Etherscan data, the current average block time for Ethereum is 13s.

Huobi Ventures then introduced different types of MEV solutions. Huobi Ventures has divided its solutions into extractable and evisable types. The extractable types include private transactions, FRaaS(front-running as a Service), and MEV Auction. For each of these categories, Huobi Ventures listed specific projects, outlined the solution logic, and concluded with a summary of the pros and cons of extractable solutions. The solutions to eliminate MEV include: in-chain operation, off-chain operation, encryption, and new trading models.

After parsing the study, the participants discussed whether there would be only one solution to MEV and how people should approach MEV.

What should we think of MEV

Zhao Chuchen, director of the Research Institute, believes that MEV, dominated by robots and miners, brings an extra tax burden to the ecology of the entire chain, especially to the users, which means that MEV has negative externalities and will affect the long-term development of ecology. With MEV solutions, achieving integration with the header protocol will be the key to large-scale adoption of the solution.

Deli from Automata believes that the exposure of the MEV problem also shows that the Ethereum platform has vulnerabilities, because the design did not consider the DeFi application such as decentralized exchange and decentralized lending on The ethereum. Because miners have absolute rights, This also leads to direct harm to users. For the different scenarios, we need to find the trade-off between the miners, the arbitrageurs, and the arbitrageurs. At the same time, Deli believes that block ordering and validation need to be separated.

In the long run, Mr. Pan of Chain News doesn't think people should accept MEV, but rather try to come up with a scheme that makes the order of transactions more equitable and that doesn't magnify or exploit users' financial behavior.

EthSign's Yan believes that maintaining the order of arbitrageurs is the key to the Flashbots solution, and is not optimistic about a solution that separates transaction sequencing and confirmation.

Yao xiang pointed out that as early as 17, Flashbots core members hinted that there was a problem with pricing the underlying resources of Ethereum in the form of Gas tokens. It turned out that there was a problem with the refund mechanism of Ethereum, and it was modified during the Upgrade in London. Subsequently, Yao Xiang added that many arbitrageurs suspended the operation of all nodes due to the reduction of arbitrageable space caused by the emergence of Flashbots, which eventually led to the decline of the number of all nodes in the network. At the same time, the presence of MEV increases the risk of the underlying blockchain being attacked.

The future of MEV

During the round table discussion, participants exchanged views on different consensus algorithms and MEV in layer 2 networks. Xie Dazhong from Huobi Ventures said that MEV will exist under any consensus algorithm because of the structure of the underlying chain and the data structure. Deli sees a solution that uses trusted hardware to create a completely private chain that will leave no arbitrage opportunities for miners and arbitragers.However, this chain is very difficult to promote.

Zhao Chuchen also believes that the existing block chains, whether PoS or other PBFT algorithms, as well as the layer 2 network like Rollup, cannot prevent the MEV problem. Another way to look at this might be to use a tool like Substrate or Cosmos SDK to build a DeFi specific application chain. Because each layer of the application chain is highly customizable, block logic can be created from the bottom to limit MEV, and with the help of various infrastructure, the cold start-up costs of the application chain will not be an issue.

Automata's Deli believes that it is difficult to restart a blockchain to solve MEV, and he is optimistic about the later development of EVM compatible chain, which should directly solve the MEV problem at the application layer. To the question of whether the cost of encryption and decrypting has an impact on the business, Deli added that the cost of encryption and decrypting is negligible if it runs off the chain, while it is extremely expensive if it is handled by smart contracts on the chain. Mr Kang says one deal can be broken up into several deals, giving miners a multipath of price and volume data.

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