By Paul Veradittakit, Partner at Pantera

Compiled by: 0xxz, Golden Finance

A prerequisite for any healthy market is regulation. Financial regulation allows seamless capital exchange, antitrust laws control rent-seeking, and intellectual property laws encourage innovation. On the blockchain, since everything is code, those who write the code are the ones who make the law.

This power is especially prevalent at the very bottom of the blockchain stack — block builders. Stakeholders competing to build blocks determine the success or failure of the blockchain itself; if block production stagnates or incentives encourage predatory behavior, the integrity of the blockchain collapses and users disappear. For example, when Solana faced an outage, users were unable to perform any transactions, meaning they couldn’t deposit or withdraw tokens.

Block builders are those who physically take transactions from the memory pool and build blocks of transactions that are then propagated to other blocks to reach consensus on the state of the blockchain. The design of how stakeholders in the block building process interact with each other is up to the companies building these systems. On Ethereum, Flashbots (a Pantera portfolio company) is the top choice. On Solana, Jito is king. And when Monad launches, aPriori will dominate.

MINE

The umbrella term used to describe the problem these companies are seeking to solve is “MEV,” or “maximum extractable value.” In short, the individuals who order transactions into these blocks are incentivized to maximize the fees they generate, which means they could maliciously reorder transactions to maximize their own profits and increase costs for users.

The design goals that the Miner Extractable Value Auction Infrastructure (MEVA) aims to address are gas fee stability, competition, and centralization. Much of this comes down to incentives; if stakeholders are financially compensated for adding positive externalities (or removing negative externalities) to block construction, then they will do so. However, there is no perfect harmony.

On Ethereum, with a block time of ~12 seconds, all stakeholders have time to access all transactions and simulate all transactions to maximize their profits. With this in mind, the current gold standard approach on Ethereum is Proposer-Builder Separation (PBS). This setup splits the process into 5 stakeholders: Users, Block Producers, Relays, Block Proposers, and Searchers. By splitting the block welfare value across multiple stakeholders, they all have an incentive to share information with each other, allowing for competitive construction of blocks while ensuring that blocks remain profitable (thus minimizing failed transactions). This has its own problems though; block producers have become centralized, with the top two builders capturing more than half of the value from block construction. Applications have also realized that they can capture their own MEV through mechanisms like the MEV tax, which allows them to participate in the transaction ordering process and reclaim value that would otherwise go to block proposers.

Monad

Monad is a new upcoming chain that will be the most performant EVM-compatible layer 1 blockchain ever, capable of 10,000 transactions per second, 1 second block times, single-slot finality, and low hardware requirements. One of the innovations that makes this possible is the separation of the execution and consensus layers, which allows the current block to run its consensus while executing the previous block. Monad Labs has raised $225 million and is expected to be the next big L1, and has accumulated more than 300,000 followers on Twitter.

This poses three design challenges:

1. Uncertainty of state:

Since the execution of the previous block has not yet completed before consensus is reached on the next block, there is no "current" state.

2. Limited time window to simulate a complete block:

The uncertain state and 1 second block time means that block builders may not have time to simulate full blocks of transactions and sort them to optimize profits.

3. Uncertainty of execution:

The probabilistic nature of transaction ordering means that the current architecture can cause bundles of transactions to be reversed on-chain, leading to higher rates of transaction failures to the detriment of users.

Solving these problems means designing an architecture that is cheap and has low transaction failure rates for users, while ensuring that block construction remains profitable for stakeholders.

aPriori Team

The aPriori founding team is uniquely positioned to succeed:

  • Ray, CEO/Co-founder, Special Project Experience at Jump Crypto, Contributor at Pyth Network, Quantitative Trader at Flow Traders

  • Olivia, CTO, former senior engineer at Coinbase, Bridgewater Investments

  • Ed, Researcher, former VCRED Data Scientist, Project Leader at Los Alamos National Laboratory

The rest of the aPriori team has backgrounds in high-frequency trading, quantitative hedge funds, and other top crypto firms.

Liquidity Staking

aPriori plans to leverage their already built infrastructure to roll out liquidity staking to platforms running their MEVA. Jito does exactly this, allowing users to stake SOL and receive a portion of the rewards earned by validators using Jito. Jito has a fully diluted value (FDV) of $2 billion and over $800,000 in monthly revenue.

Testnet launch

aPriori will launch the Liquid Staking Protocol on the Monad testnet once it goes live and completes some final integrations. aPriori also plans to release an initial version of the MEVA system during the Monad testnet, focusing on the following aspects:

  • Guide searchers and block builders to participate in block space auctions,

  • Facilitate validator experimentation and stress-test client software.

Designing MEVA is a fundamental part of any blockchain's internal plumbing. Monad's ultra-parallel EVM L1 is a new ecosystem that requires constant innovation to ensure a good user experience and profitable block builders. The team has the experience, drive, and vision to continue doing so.

During this testnet phase, the team invites all parties to participate in testing and provide feedback to work on mainnet preparation and further roadmap items such as protecting rpcs against sandwich attacks and analytical dashboards.