Summary
MEV Introduction
PBS Implementation at BSC
BSC transparent and fair block market
MEV protection via BSC block builder
introduce
MEV is a concept that has become core to the blockchain industry, especially in the context of decentralized finance (DeFi). MEV refers to the profit that miners, validators, and other participants can earn from ordering, reviewing, or inserting transactions within a block. Participants in MEV include users, wallets, searchers, builders, and miners, each with different roles and incentives. In this article, we will take a deep dive into the MEV landscape of the BNB Chain ecosystem.
Background and Progress
The industry has made great progress on MEV, developing various solutions to mitigate its negative effects and improve efficiency. Since the beginning of 2023, the BNB Smart Chain community has done a lot of work on MEV and is finally on the path of providing MEV solutions to all validators.
The Ethereum ecosystem has been at the forefront of addressing the MEV challenge and has implemented multiple innovative solutions to mitigate its impact. Here are some highlights of the current technical solutions in the Ethereum ecosystem:
Flashbots: Flashbots is a research and development organization that creates a transparent market for MEV extraction. It allows searchers to send transaction packages directly to miners, reducing harmful effects such as gas price auctions and enabling more efficient value extraction.
Archer Swap: This is a trading platform that helps users avoid front-running by sending transactions directly to miners instead of the public memory pool. It provides users with better trade execution and protection against MEV-related risks.
MEV-Boost: Following the merger of Ethereum’s transition to Proof-of-Stake, MEV-Boost is a middleware that plugs into the architecture and allows validators to maximize Ethereum’s censorship resistance by building low-MEV blocks locally while still outsourcing the construction of high-MEV blocks.
SUAVE: Flashbots’ SUAVE project aims to decentralize the block building process. It acts as a plug-and-play memory pool and decentralized block builder for any blockchain (including Ethereum), enhancing the resilience of the network.
COW Swap: A decentralized trading protocol that provides MEV protection by using private liquidity sources and routing trades in a way that minimizes the risk of front-end running bots.
Gas Token Utilization: Some searchers in Ethereum use Gas Tokens to pay for transactions, optimizing for Gas savings and allowing them to bid higher during auctions.
Decentralized Builder Concepts: Research into concepts like distributed builders and crLists (containment lists) aims to limit the centralization of block builders, ensuring the network is more decentralized and resilient.
MEV-capturing AMMs: New automated market maker (AMM) designs are being explored that shift transaction ordering power to AMM designers and liquidity providers, enabling them to capture a portion of the MEV currently harvested by block builders and proposers.
Order Flow Auction: This mechanism allows any searcher or builder to bid on user order flow, creating a more competitive and transparent market for MEV extraction.
Tornado Cash: A privacy solution that can also mitigate some of the MEV risks by breaking the on-chain link between source and destination addresses.
These solutions represent the collective efforts of the EVM community to address the complex challenges posed by MEVs. Ongoing research and development in this area shows that the industry is maturing and is actively addressing the most pressing issues.
Current on-chain analysis and implementation
As of the latest data, approximately 22 validators have integrated with MEV providers, of which 29 are actually active. This represents a large portion of active validators and emphasizes the growing importance of MEV in the blockchain ecosystem, and BloxRoute is becoming a relay in the BSC validator community.
growth trend
The strong growth in integrations over the last quarter demonstrates growing interest in MEV optimization for BSC validators. This trend is particularly noteworthy considering that only 6 validators had integrated with MEV providers by the end of 2022. The rapid growth in integrations reflects the perceived value and potential of MEV and suggests that this area will continue to be a focus of innovation and investment in the months and years ahead.
Many validators report increased profits and efficiency. The integration of MEV providers enables validators and delegators to tap into new revenue streams and optimize their operations. This success drives the BSC ecosystem’s growing interest in MEV
On the other hand, some validators face difficulties with integration, competitiveness, and transparency. The complexity of integrating MEV providers with existing systems can present technical challenges. Additionally, concerns about the transparency and competitiveness impact of MEV extraction raise questions about the long-term sustainability and public perception of these practices.
These successes and challenges paint a nuanced picture of the current state of on-chain MEV analysis and implementation. They highlight the need for ongoing research, development, and dialogue to ensure that MEV continues to evolve in a way that balances profitability, responsibility, and transparency. The current situation highlights the need to increase competitiveness and introduce more relays to ensure innovation, increase efficiency, and ensure that BSC's MEV ecosystem is more balanced and robust.
Challenges and opportunities
MEV presents challenges and opportunities to the blockchain industry. While it raises complex questions related to fairness, centralization, and ethics, it also offers the potential to improve efficiency, profitability, and innovation. Attracting more relayers requires a multifaceted approach that emphasizes transparency, incentives, ease of integration, community engagement, and regulatory compliance.
Challenges of implementing MEV
Fairness of transaction prioritization: Ensuring that transactions are processed fairly and are not manipulated by miners or validators is a significant challenge. The ability to reorder or exclude transactions can lead to front-running and other exploitative behavior.
Complexity of implementation: Creating a system that can effectively capture MEV while maintaining network integrity and performance is complex. It requires careful consideration of various factors, including transaction fees, gas prices, and network congestion.
Centralization risk: MEV can incentivize centralization, with a few powerful entities controlling most of the computing power. This could undermine the decentralized nature of the blockchain and create vulnerabilities.
Ethical considerations: The extraction of MEV raises ethical questions about fairness and transparency in blockchains. It could create an uneven playing field that gives some participants an advantage over others.
Opportunities for new implementations
Improved efficiency: If implemented properly, MEV can lead to more efficient block production and transaction processing. By optimizing transactions, miners can maximize profits while improving network performance.
Potential profitability for various participants: MEV provides miners, searchers, block builders, and proposers with the opportunity to earn additional income. By strategically including transactions, they can capture value that would otherwise be lost.
Transaction Processing Innovation: MEV opens the door to innovative solutions for transaction processing, including batch auctions, fair ordering, and threshold encryption. These can alleviate some of the challenges associated with MEV and enhance the overall user experience.
Collaboration with Layer 2 Solutions: Integrating MEV with Layer 2 solutions (such as rollups) can create synergies that enhance scalability and performance. It also allows experimentation with different MEV models and approaches.
Community development and multiple technical proposal approaches to address challenges and how to move forward
Multiple approaches, including various architectural solutions, represent collaborative strategies to address MEV challenges and help move forward in the broader ecosystem. By leveraging diverse expertise and innovative solutions within the community, we highlight the following implementations that reflect a joint effort to improve network efficiency, security, and profitability, thereby fostering a more resilient and adaptable blockchain infrastructure.
Bid Relay within the MEV infrastructure acts as a key bridge connecting various transaction stakeholders, simplifying the identification and utilization of MEV opportunities. Its bidding process not only ensures transparency and fairness, but also optimizes profits for validators and searchers. By acting as an intermediary, Bid Relay improves network efficiency, reduces congestion and enhances security while being consistent with the decentralization of the blockchain. Its integration is critical to a strong, scalable and fair MEV infrastructure, ensuring optimal transaction processing and profit maximization.
Let's first introduce the bidding relay.
Bid Relay is a complex method for managing MEV in a blockchain network. Its focus is to create a more transparent, efficient, and fair environment for transaction inclusion. Here are its components and the importance of each design element:
Components and Workflow
Seeker: Identifies MEV opportunities and sends bids to MEV Relay.
MEV Relay: Centralizes the bidding process, collects and aggregates bids.
Miners/Validators: Decide on transaction inclusion based on MEV Relay’s proposal.
Importance of each design element
The role of the searcher: Create a competitive environment where different entities can identify and bid on MEV opportunities, thereby promoting innovation and efficiency.
The role of MEV Relay: Act as a transparent intermediary, reduce network congestion and ensure a fair bidding process.
Role of Miners/Validators: Make informed decisions on transaction inclusion based on aggregated bids, thereby strengthening network integrity.
Overall importance
Efficiency: Centralizing the bidding process reduces complexity and speeds up transaction processing.
Transparency: Ensure that all participants have equal access to and understanding of the process.
Profit maximization: Facilitating profit maximization for miners and searchers through a structured bidding process.
Adaptability: Its design allows for implementation across various blockchain networks.
In summary, the Bid Relay MEV architecture provides a balanced and innovative approach to handling MEV. By focusing on the roles of searchers, MEV Relays, and miners/validators, it promotes fairness, efficiency, and transparency. Its unique design elements make it a promising solution to address ongoing challenges related to MEV in the blockchain ecosystem.
BloxRoute’s Flashbots-like BSC solution currently has 9 validators:
introduce
Flashbots is an open-source, permissionless, and transparent solution for extracting MEV (Miner Extractable Value) on Ethereum. Since BSC is based on EVM, it is natural to replicate BSC with some modifications. The introduction of mev-boost in Ethereum creates a win-win situation for searchers, block builders, and proposers. To this end, the BloxRoute team has put forward a proposal to implement the same spirit of profit maximization and profit sharing on the BNB Smart Chain.
Overview
The MEV-Relay will propose potential blocks to connected validators. Unlike validators, the MEV-Relay can receive transaction “bundles” built by the MEV Searcher, thereby maximizing profits for all stakeholders.
architecture:
The architecture integrates the roles of searchers, builders, and relayers to generate the most profitable blocks with MEV builders. However, the validator program requires additional modifications.
implement
MEV-Relay proposes blocks: Within a given block, MEV-Relay can propose multiple blocks if the new block offers better rewards. Validators verify and seal each proposed block that improves value.
Verification node changes:
Open HTTP endpoints: whitelist relays and implement endpoints like eth_proposeBlock and eth_registerValidator.
Parallel production: Validators also generate blocks from memory pool transactions and select the blocks with the highest rewards to submit to the network.
Rate Limiter: Implement rate limiter on eth_proposedBlock via IP.
Launch parameters: Accepts parameters like miner.mevrelays and miner.mevproposedblockuri.
Endpoints:
eth_propiedBlock: represents a proposed block from a relay.
eth_registerValidator: The validator computes the hash of the bytes presenting the URI to accept the eth_proposedBlock and signs it.
Validator startup parameters
miner.mevrelays: Destination to register validators at each epoch.
miner.mevpropishedblockuri: The validator URI to which the MEV relay should send the proposed blocks.
miner.mevproposeblocknamespace: Specifies whether the validator should accept proposal blocks using the eth or mev namespace.
Timing: Initially, MEV-Relay will start proposing blocks 2.5 seconds after the current block start time due to the fast block time within the BSC network. Validators are required to verify and propose a block within 3 seconds (for more information on the importance of these 3 seconds, see this blog).
Customization: Customizing the validator code is necessary, but the long-term upgrade and maintenance costs are high.
open source code:
https://github.com/bloXroute-Labs/bsc-mev-validator/pull/1
advantage:
Profit maximization: By allowing MEV-Relay to propose potential blocks, the solution can maximize profits for all stakeholders, including searchers, block builders, and proposers.
Transparency and Collaboration: As an open source project, it encourages community collaboration and ensures transparency in the development process.
Parallel production: Validators can produce blocks in parallel from memory pool transactions, thereby optimizing the block selection process.
Rate Limiting: Implementing a rate limiter on the eth_proposedBlock by IP helps control traffic and prevent abuse.
Enhanced functionality: This solution enhances the overall functionality of the BNB Smart Chain by implementing specific endpoints, methods, and configurations.
shortcoming
Customization Complexity: Customizing the validator’s code is necessary but will be costly to upgrade and maintain in the long term. This may be a barrier for some validators who need to update based on the upcoming BSC upgrade.
Potential security issues: Opening HTTP endpoints and implementing new methods can introduce potential security vulnerabilities if not handled carefully.
Dependence on validators: The success of the solution depends on the willingness of validators to implement the required changes, which may not always be guaranteed.
Time limit: The fast block time within the BSC network imposes a limit on the time to propose a block. Validators need to verify and propose a block within 3 seconds, which can be challenging.
Potential Centralization Risk: If implemented without decentralization in mind, this solution could lead to centralization risk where a small number of entities control the majority of MEV extraction.
BloxRoute’s BSC-like Flashbots solution represents a significant advancement in maximizing profits and efficiency within the BNB Smart Chain. While it offers numerous benefits such as profit maximization, transparency, and enhanced functionality, it also presents challenges related to customization complexity, potential security issues, and time constraints. Careful consideration and strong implementation are critical to leveraging the benefits of this innovative solution and mitigating its drawbacks.
BSC MEV - Utilizing Sentinel Nodes
In the context of BSC, implementing a MEV solution can be complex and presents potential risks to network stability as block sizes increase and the number of validators grows. Utilizing sentinel nodes as part of the MEV solution provides a way to mitigate these risks and enhance network stability.
Architecture Overview
The architecture focuses on the use of sentinel nodes, which act as a protective barrier for verification nodes and ensure that the network can withstand denial of service attacks. The main features of the architecture are:
No changes to validator nodes are required: By centralizing the MEV implementation on sentinel nodes, validator nodes remain unchanged, improving network stability and security.
Sentinel Node Modifications: Only Sentinel Nodes require modification, allowing for a more controlled and secure implementation of the MEV solution.
Private connections between validator and sentinel nodes: Validator nodes establish private connections with corresponding sentinel nodes, and sentinel nodes communicate with other nodes in the public P2P network.
Security through Isolation: Validator nodes are effectively surrounded by Sentinel nodes, isolating them from direct exposure to and potential attacks on the public network.
Configure direct send and pull mechanisms: Set up the Sentinel nodes to use the Push method to send transactions to the validator nodes, while using the Pull method for other nodes in the public P2P network.
Monitoring and Maintenance: Implement monitoring tools to track the performance and security of Sentinel nodes. Regular maintenance and updates are critical to ensure optimal operation.
In a P2P network, transactions can be propagated in two ways:
Push: The sending node sends the complete transaction directly to the receiving validator node. This method is faster and is the preferred method in the BSC network due to the critical 3-second time window for block validation.
Pull: The sending node only sends the transaction hash, and the receiving node pulls the transaction from the sentinel node if it does not exist locally. This method is slower due to the need for additional round-trip communication.
MEV Builder Integration
MEV builders can be integrated into the sentinel node architecture to prioritize the extraction of MEV. By ensuring that the sentinel node only sends the transaction hash to the validator node, and letting the MEV builder send the complete transaction, the MEV builder gains an advantage in transaction arrival time. This priority enables more efficient and effective MEV extraction.
Some benefits of implementing via sentinel nodes:
Enhanced security: Sentinel nodes act as a protective barrier around validator nodes, preventing them from being directly attacked. This isolation offers significant advantages over solutions like Flashbots, where validator nodes can be more exposed.
Stability: By centralizing the MEV implementation on sentinel nodes and leaving validator nodes unchanged, the core functionality of the network remains stable. Solutions like Flashbots may require more extensive modifications to validator nodes in the future, which could introduce instability.
Scalability and flexibility: Sentry nodes can quickly spin up or change their IP addresses. This flexibility allows for easier scaling and adaptation to changing network conditions, which can be more challenging for solutions like Flashbots.
Efficient MEV extraction: The architecture optimizes MEV extraction by prioritizing MEV builders at transaction arrival time. This efficiency may be more difficult to achieve in solutions like Flashbots, as transaction propagation may be uncontrolled.
Reduced maintenance costs: Implementing MEV via sentinel nodes may require fewer changes to existing network infrastructure than solutions like Flashbots. This can reduce long-term upgrade and maintenance costs.
Customization: Sentinel nodes provide a more controlled environment that can be optimized and customized specifically for MEV extraction. Solutions like Flashbots may not offer the same level of control and customization.
Conforms to existing network topologies: Many networks already utilize sentinel nodes for security purposes. Implementing MEV via sentinel nodes aligns with existing topologies, allowing for a more seamless integration.
Implementing MEV using Sentry Nodes as Web3 in the BSC network can provide a powerful and efficient solution. By centralizing the implementation on Sentry Nodes and integrating the MEV builder, the architecture ensures security, stability, and efficiency. It represents a promising alternative direction for the continued development and enhancement of the BSC network, aligned with the broader goals of transparency, profitability, and resilience in the blockchain ecosystem.
In general
BSC Networks faces a complex landscape when implementing MEV solutions, with different approaches offering unique advantages and challenges. Two solutions have emerged: a Flashbots-like solution introduced by BloxRoute and the Sentry Node architecture. Both approaches have their merits, but also present unique challenges that must be carefully addressed.
Solutions like Flashbots offer a transparent, open-source approach that maximizes profits for all stakeholders. However, it requires significant customization and can introduce security vulnerabilities and centralization risks. On the other hand, the Sentinel Node architecture emphasizes security and stability by isolating validation nodes and centralizing MEV implementation on Sentinel Nodes. This approach offers enhanced security, scalability, and efficiency, but can also present its own complexities and limitations.
Future Directions and Conclusions
MEV represents a complex interaction between various stakeholders, each seeking to maximize their own gains while maintaining the stability and integrity of the network. Several architectural solutions have emerged to address the challenges of MEV, including Flashbots-like solutions and Sentinel Node utilization. These approaches leverage different expertise and innovative solutions within the community and aim to create a win-win situation for all participants.
Transparency is key to building trust and fostering collaboration within the blockchain community. Integrating MEV in a transparent manner while ensuring blockchain explorers have clear insight into transaction flows will enable all stakeholders to understand and participate in the ecosystem more effectively. For a more detailed research report on MEV, see here
The future of MEV in the BSC ecosystem holds exciting possibilities. From improved security and efficiency to greater transparency and collaboration, MEV is poised to play a central role in the continued evolution of the blockchain space. Validators, Seekers, and the broader community can benefit from these advancements, as long as challenges are addressed with care and innovation. MEV’s integration with Explorers, in particular, represents an important step toward a more transparent and resilient network. By taking a community-driven, collaborative approach, the BSC ecosystem can fully tap into the potential of MEV.
