Flashbots
blog.bitmex.com
blog.bitmex.com
Mining pools, not miners, connected to the flashbots mempool to pick up their transactions. There can be many mempools and mempools don't need to talk to each other. It was in the benefit for the miners for pools to do this (ie: their customers), so all the big ones did it.
By doing so, miners would earn extra value (aka: MEV) from these transactions because flashbots would bundle them up and order them. If you wanted to be at the top of the list with your transactions, you'd pay a bit more.
The really centralized bit of this is that flashbots actually can be turned on/off [0], which I find rather inexcusable.
I would submit that it’s probably best just avoided by anyone who’s objective is clear communication. It’s still great for ruckus-making, but that’s probably more of a bug than a feature on HN.
FWIW I’m also very skeptical of modern MEV-world. I just think “front running” is a bad term for anything these days.
With a DEX your transaction might just not execute at all some of the time of creating the transaction, so you might burn a transaction, and there's no orderbook for the order to sit in til later.
A pension fund (or rather the agency execution-type firm that they'd be crazy not to employ for block trades) wants deep books and narrow spreads: if they were in the business of collecting maker rebates then they'd be market makers, which would make them terrible pension fund managers.
If their agency execution firm is able to shave a bit of slippage/friction off by leaving some passive orders in the book I suppose they might have some luck with that, but there's no way that punishing retail traders with wider spreads on the off chance that an agency execution firm has to have a socially-approved client is a net win under any definition of socially positive. Execution cost for non-advanced actors is wide spreads, shallow insides, and high fees: strict market makers improve all of that.
People who make arguments like this one are usually day traders with no business using limit orders. I'm not saying that's what you are, but that's usually where you hear it: certainly to the extent that this argument has an intellectual pedigree other than that awful Lewis book, that's it.
I'm willing to begrudgingly accept "money spent to effect speech is speech" but no further. The vast majority of crypto transactions do not fall within that narrow bucket, and using the word "censor" to refer to reversing them with a 51% attack is propaganda.
When an authority freezes your bank accounts (like Trudeau/Freeland did to the truckers) they infringe on your other rights (right to property, right to shelter, right to assembly , etc) demonstrating how much of a slave people are under these regimes.
When a payment processor cuts you off without recourse, they also infringe on your rights.
Money that most people know today is a terrible way to store value as it is also a tool for the state to control them.
Ethereum is now another government tool since a great percentage of transactions are validated within the US jurisdiction and are thus subject to the same draconian laws as federal bank issued money.
The etymology of the term "front-running" goes at least as far back as the name "Reuters" and the use of pigeons to be the microwave towers of the day: https://www.reuters.com/article/rpb-historyofspeed/the-long-..., and probably a great deal further. I imagine the actual origin of the term is lost in deep antiquity due to the fact that someone with tradable information in hand would profit more by "running" than by walking.
I don't personally deal for profit in mempool analysis, but I'm the "low-latency guy" to enough people that do that I've had to learn the mechanics of a few of the big chains, which is frankly time that I'll never get back, and while the Nash equilibria are far less stable/obvious in this world than in a good old fashioned price-time precedence order-book, it looks pretty fucking shady to me.
> The Flashbots system is integrated into the current Proof of Work (PoW) mining system on Ethereum. When the Merge happens and PoW mining is switched off, Flashbots adoption will reset to zero again.
This article is kind of dated at this point.
I read it as what was and now what is needed
These relays effectively accept bundles from MEV searchers, which are then sent to the validator running mev-boost as they propose their block.
> [flashbots] is not, strictly speaking, a necessary component of the block production process. The centralised Flashbots relay entity does not directly own any hashpower. Nor can Flashbots censor non-MEV related transactions. Miners can still include transactions that did not go through the Flashbots relay.
This is also likely to change as MEV Boost relay code was recently open sourced to accelerate and promote more relay diversity.
https://www.theblock.co/amp/post/164152/flashbots-to-hasten-...
I want to make sure I have this straight. The "therefore" in this paragraph refers to how miners "require" a way to front-run orders, bets, and other transactions made on the network lest they fall behind their peers in the mining arms race. The article calls this "Miner Extractable Value" or MEV.
So the centralization pressure from Flashbot comes from miners front-running "DeFi" (decentralized finance) players.
> The Flashbots system is integrated into the current Proof of Work (PoW) mining system on Ethereum. When the Merge happens and PoW mining is switched off, Flashbots adoption will reset to zero again. In order to mitigate against the MEV problem a new Flashbots infrastructure will need to be built up and staking agents will need to adopt this new system. This was not in the ETH 2.0 roadmap and may be an additional complication related to the upgrade to ETH 2.0.
This part is not as clear. How does the MEV landscape change in post-merge Ethereum?
The way that transactions are bundled is no longer done by mining pools and block construction has the ability to be outsourced. I personally, think they should have shipped with this, but I'd expect this to get rolled into a future release.
Introducing mev-boost now would have likely caused delays in the merge and at some point, you just have to make the switch and fix things later, which is what they did.
[0] https://twitter.com/koeppelmann/status/1570436882483523585
The only ETH a validator can get from validating that they can sell immediately is their take from MEV, i.e. frontrunning.
Why would a centralized relay (flashbots) NOT take advantage of all the orders it processes?
As far as I can tell, the MEV has just moved from the miners to the flashbot(s?).
Folks will stop sending them their TX if they never come out in blocks, but competing copy TX with someone else's address systematically do. So that they do their job is, to a degree, verifiable.
It's a small community who all know each other, so antisocial behaviour can be punished using traditional village politics technology.
That means Cloudflare can capture or sell the advantage also, unnecessarily.
From an outsider's perspective, a more likely explanation is that the funding is a subsidy. The VC having a stake in this space would have invested in a lot of other companies too. If their funding for Flashbots is notably less than the aggregate expected value of their total investment in the ecosystem at large, and if without Flashbots that expected value would drop by more than the funding amount, then the subsidy would be a net positive investment for that VC.
In other words, they may have seen Flashbots as an ongoing cost of doing business.
And if they had indeed achieved staying centralisation, there's always the access fee structure to hike up.
Flashbots is a single centralised entity. It is funded by Fred Ehrsam’s crypto VC firm Paradigm, although it appears that this funding could be altruistic. Searchers send there MEV transactions to the server with the address https://relay.flashbots.net/ and the server is currently located in Ohio in the United States of America.
But HTTPS is 443, not 80.
The fact that Cloudflare was privy to all Ethereum ecosystem communication with flashbots gives me the heebie jeebies.
"Well, but maybe if you ..."
But I've never seen it in the wild.
source: the single server https://boost-relay.flashbots.net/
We are in mev-boost infancy and there are already 8 relay to chose from, beside home-building of blocks.
I can see it's already starting.
Unrelated aside: why is the quality of Hacker News posts and comments on crypto so bad? I experience extreme Gell-Mann amnesia[4] almost every post I read. This is the industry I work in and the amount of misinformation produced and spread on Hacker News is absurd.
[1]: https://arxiv.org/abs/1904.05234
[2]: https://explore.flashbots.net
[3]: https://flashbots.notion.site/flashbots/mev-day-836f88806995...
[4]: https://www.johndcook.com/blog/2021/01/18/gell-mann-amnesia/
It's because the posters think they are smart. With every passing day that cryptocurrencies become adopted/accepted, their smartness becomes questionable, even to themselves. For them, it is easier to double down on the flawed arguments - well over 10 years now - than accept that while they are smart in some areas, they are not in all.
This is false. You never had to run a validator to watch the mempool and do MEV.
As soon as that node ends up running on AWS rather than a user’s typical laptop as suggested by Vitalik and his friends, then that was another decentralization failure there and there is no self-hosting at home.
Finally, when the merge was finalized, there where only two addresses that ended up holding more than 48% of Ethereum that is used for the PoS mechanism to work. Another centralization risk feared that happened in reality.
So, that looks to me like a failure of decentralization and a more centralized system that as expected; made worse with Proof of Stake.
The merge killed the thing that keep ETH DE-centralized.
Now who owns more ETH has more power...
Like centralized finance.. instead of Defi.
I would argue that that is false. Nobody can approve invalid transactions or maliciously alter the state of the chain. So in that sense, no they do not have more power.