Miner Extractable Value

Miner Extractable Value (MEV) poses significant risks for blockchain systems. Initially, blockchains incentivized miners based on block subsidies and transaction fees. However, more intricate contracts now complicate revenue streams for miners, allowing preferential access to contract interactions.

Miners can exploit this situation to gain early access, bringing centralization pressures as they need to analyze complex contracts, impacting censorship resistance.

Proposer Builder Separation

Ethereum exemplifies MEV issues. Proposer Builder Separation aimed to decentralize responsibility between builders who create transaction templates and miners/stakers who select profitable blocks. Unfortunately, a few dominant builders lead to effective censorship by dictating profitable templates, limiting true decentralization.

MEVpool

The MEVpool proposal aims to improve upon PBS for Bitcoin while still allowing miners to maintain some independence in block construction. It involves marketplace relays that facilitate transaction submissions and fees to optimize miners’ MEV extraction.

In MEVpool, miners construct the final block templates but rely on relays for optimal transaction selection. This can involve either trusted third-party relays or using Trusted Execution Environments (TEE) for block template construction.

Ultimately, MEVpool may not eliminate centralization risks but seeks to mitigate censorship issues while retaining some miner flexibility. The strategy still has vulnerabilities, particularly from large marketplaces managing order information and transaction submissions.

This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

This post ‘MEVpool, The Best Bandaid We Have For MEV’ first appeared on Bitcoin Magazine and is written by Shinobi.