Phil Daian, Devcon 2022  (summary | video)

This is the abridged transcript adapted from Phil Daian’s talk on Oct 14, 2022 at Devcon VI in Bogota, Colombia.

Today, I’m going to be taking you on a tour through my journey over the last three years.

I’m going to talk about Flashbots and the choices we’ve made as a collective, how they relate to the base layer of Ethereum security and fairness for users. What is Flashbots doing? How can we all do it together with the community, to build these systems for the next trillion?

Where did MEV come from?

The long game of MEV

This all started for me with an academic paper I wrote at Cornell called Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges, where we looked at the market dynamics of several decentralized exchanges that were popular at the time around 2018 and 2019. We looked into the game that bots were playing to arbitrage decentralized exchanges. We examined how that related to user fairness and consensus security using extensive measurement infrastructure.

In this paper, we defined MEV, short for Miner Extractable Value (or Maximal Extractable Value today), as the total amount that Ethereum miners (or validators today) can extract from manipulation of transactions within a given time frame, which may include multiple blocks worth of transactions. We identified ordering optimization fees (OOF) as representing one case of MEV.

On the one hand, MEV is fundamental, like financial potential energy that runs through every any distributed systems secured by economic incentives. On the other hand, it poses concrete, measurable, consensus-layer security risks. In the paper, we demonstrated empirically that MEV poses a realistic threat to Ethereum.