Unveiling the Mystery of MEV: Illuminating the Dark Forest of Ethereum

MEV(, or Maximum Extractable Value, has long been regarded as one of the most controversial aspects of the Ethereum ecosystem. With the surge in on-chain activity and the evolution of infrastructure, MEV has not only caused losses for users but has also raised concerns about the decentralization and fairness of Ethereum. This article aims to provide a comprehensive analysis of the current state, issues, and potential solutions regarding MEV, unveiling the mysteries surrounding it for readers.

The Current State of MEV

Since The Merge, Ethereum has adopted a Proof of Stake (PoS) mechanism, and block generation has also changed. Each Epoch is divided into 32 Slots, with each Slot being a block time unit of 12 seconds. The network randomly selects a validator committee, from which a block proposer is chosen to package transactions and produce blocks.

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To improve efficiency, block proposal and construction have been separated, forming the PBS) Proposer-Builder Separation( architecture. In this architecture, the main participants include:

• Builder: Responsible for constructing block content
• Relayer: an intermediary between Builder and Proposer
• Proposer: responsible for verifying and proposing blocks
• Searcher: A robot for finding MEV opportunities
• User: Regular User

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The main types of MEV on the chain currently include arbitrage, sandwich attacks, and liquidations. In the past 30 days, MEV bots have earned approximately $2.6 million in profit, with arbitrage accounting for the largest share.

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Problems Caused by MEV

Although MEV has some positive effects, such as helping to reduce price differences between DEXs and assisting in liquidation, its negative impacts are more significant:

1. Cause losses to users, especially through methods such as sandwich attacks.
2. Causes fluctuations in Gas fees, affecting user experience.
3. Intensifying the trend of centralization, contrary to the decentralized vision of Ethereum.
4. Introduced the trust issue of third parties ) such as Relayer (.

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Potential Solutions

To mitigate the negative effects of MEV, the industry is exploring various solutions:

) 1. SUAVE

SUAVE proposed by Flashbots aims to make MEV more decentralized and transparent by building a new blockchain. It allows the conversion of the current centralized MEV infrastructure into smart contracts on a decentralized blockchain.

( 2. Order Flow Auction)OFA###

The OFA mechanism allows order initiators to send orders to OFA, where bidders can bid to obtain order information and extract MEV. This approach can make MEV more transparent and reduce user losses.

3. Private Trading Pool Encryption

Through technologies such as multi-party computation ( MPC ), verifiable delay functions ( VDF ), threshold signatures ### TSS (, or zero-knowledge proofs ) ZKP (, the private transaction pool is encrypted to prevent the Searcher from obtaining transaction information in advance.

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) 4. Execution Tickets

The proposal put forward by Justin Drake aims to allocate the rights to execute blocks by introducing a Tickets market, with the goal of distributing MEV profits to a broader range of participants.

( 5. Protocol-level PBS)e-PBS###

Ethereum is exploring the incorporation of PBS at the protocol level to eliminate dependence on third-party Relayers. The EIP-7732 proposal aims to achieve this.

6. PEPC

The solution proposed by EigenLayer attempts to address the trust issues of Relayers by introducing a trust mechanism within the protocol.

Conclusion

MEV is a complex issue with no simple solutions. Various proposals have their pros and cons, requiring a trade-off between security, decentralization, and efficiency. As Ethereum transitions to a Layer 2 architecture, the complexity of MEV may further increase. In the future, we need to continue exploring more innovative solutions to balance the positive and negative impacts of MEV and create a more fair and transparent blockchain environment for users.