foreign
[Music]
from the last talk we get we arrived at
this slide and having a test for non-mev
news but in this talk I'm done talk
about you know sorry but this
formulation of a movie is meat so
specifically what it means uh why
because it's like a party guy you know a
guy at the corner of a party thing they
don't know this is not Mev while the
other people all of us are like yes we
know and we don't care it's a good name
and it's uh you know memes are important
memes are more important than you know
arguably uh many other
since in our life
and then but there are also another
extreme in the community are vouching
for a formalization of family right so
some common pitfalls on this uh on the
world on the definition of the word and
maybe is that we give up on the clarity
of the notion we over formalize it such
that we lose some memes right with it is
no longer a mean term and it's lost in
and we are getting lost in the detail of
the real value of defining mevs so in
this talk I will give a clear definition
of Mev that points to a solution to
points clearly to the solution recipes
that uh how we should solve an EV and uh
I'm not gonna give a mid curve
formalization nor am I abandoning our
memes
so what is Mev so by the end of the talk
you will see that Mev is Al Capone evil
deity and Lewis the 16th
so uh this is me
uh yeah so so to
um start we see that so so why Al
Capone's Mafia is Mev so because Mafia
extractable value you know CCM arises
from arises when one agent or Collision
of Agents gains an asymmetric knowledge
of another agent's private information
so this condition sounds really exists
on a symmetric sophistication between
agents so very easy examples include
sandwich internalized front running or
in traditional Finance we see that
people trading one strategy is actually
people trading on the limiting other
booths in Balance so which is
essentially a form of one Asian gaining
knowledge of another agent's utility or
intent right when you see more bid than
us on the books then you take the best
us and you make the best bit
um so then evil deities are more like
why is it that maybe so monologue is
terrible value is a value that was
surrendered to the monologue IE on
coordination within your mechanism your
allocation mechanisms for people's
preferences so one example of this is
the negative externalities caused by any
expressive mechanisms so for example
suppose you have a random ordering then
people uh spam the network and and that
is the only way they can express their
preferences and it is very
one-dimensional way right so you have a
kind of a shrink transaction quality
trilemma and there are of course many
other examples for so for example in the
traditional high frequency trading arms
race example
um people the mark the cost that market
maker spends on arms race gaining
latency advantages was channeled as
charging higher spreads for users so the
externality is transferred from
sophisticated agents to unsophisticated
agents there are some other examples and
so finally Louis XVI
value arises from the fact that the
coordinator so for example the sequencer
or the validator has the ultimate power
of deciding what the ordering or the
allocation of specification on status so
by specification on state I specifically
mean which specification or property
does the next day satisfy you can for
those of you familiar with programming
languages you can see that this directly
links into the um you know formal
verification you have a program and the
specification that the next state must
satisfy so then some examples of this
include that the validators currently
you know in ethereum or other chains
accrue value because they have the power
of determining what content is in the
block and many other examples for uh in
in chat by such as collocation fees and
cross-chain such as cross-doming market
makers for swaps
so then we can see that Mev arises from
three distinct properties the mafia's
monologue and the Monarch so now a
little bit more formalized suppose that
m is the monarching our unions over or
our gaming and W is the social welfare
function then we know that the monologue
kick straddle value equals the welfare
that is achievable by the best possible
mechanism for our game to allocate
specifications on State minus the
welfare of the current Monarch and the
monarchy V equals to the uh of the
current Monarch minus the welfare that
that already existed you know in the
original game in without our current
Monarch has a coordinator so you can see
those closely tied to the idea of
externalities right and then from our
definition we know immediately that
Monarch EV plus monologue extractable
value equals the wealth of the best
possible mechanism in our uh
in our game minus the welfare of the
original game so so it equals the
constant right so it is so the malloc UV
plus monarchy V is innate to the game e
and does not depend on Virtual on our
choice of the mechanism and
um and finally uh defining a mafia EV is
a little bit hard but harder but the
intuition in the mafia if it depends on
the specific sophistication details or
the power of agents that is existent in
m so what this means is that how much
exposed knowledge or last look One agent
can have over other agents or their
coalitions so then we can see that those
three values have very have distinct
sources and those sources of value are
non-overlapping thus we can call them
you know our new definition collectively
three EV Mafia monologue Monarch
extractable value you know it forms the
sum type it's perfection
um
so then from what this implies is that
the resolution recipe right future is in
our hands we know that Mafia plus model
plus Monarch is 100 of the Mev and that
monarchy V plus monarchy V equals to the
constant depending only on the original
game but the percentage of malloc versus
Monarch depends on M our our choice of
the mechanism so
you can already see that there is a nice
link with the notion of price of Anarchy
In traditional mechanism design here
right although in traditional mechanism
design of course like the you know there
are theories you want bonds so they have
so they Define price of energy as like
the division but now we are interested
in values so you know I kind of Define
it as difference
um uh and then finally we can see that
Mafia UV is also a constant depending on
choice of them so since the sources are
distinct we can adjust the percentage of
the three variants of MAV by
transforming one form of Mev into
another but in our designing of a better
mechanism app so I argue that ideally we
should have zero percent Mafia zero
percent malloc and 100 Monarch where the
monarchs profits are distributed so what
this specifically means and why is this
true is that because Mafia relies on the
existence that there is one exposed
knowledge and there's unsophistication
or sophistication between agents right
there is a symmetry and so specifically
once you have this then the
sophisticated agents are going to charge
sort of unsophistication text on the
other agents and thus this hurts
long-term stability of the domain or
long-term prosperity and then why we
want zero percent monologue is because
any value that or any weapon that is
tributed to the monologue is forever
lost it's not recoverable and nor is it
redistributable so then uh and why 100
Monarch with redistribution is that if
there is no redistribution to the
Monarch then uh then the 100 Monarch EV
going to erode the incentive for people
to use your mechanism right because
you're essentially creating
reintroducing the value that they would
have paid to the monologue by having
them pay to the Monarch instead so
there's a different you can see there's
uh so users would be indifferent between
paying to the monologue in the original
game and paying to the monarchy in The
Meta game so you know this kind of
violates the individual rationality
guarantees
so then there are of course some caveats
as to our choice of Monarch and our
definitions so as we can see that the
welfare of the game without the
mechanism depends on E right so now we
assume that the mechanism
represents a domain or a builder or some
just some Coalition of Agents then we
can give a kind of and have a notion of
Internet domain correlation Factor K
where k equals one if the mechanism is
monopolistic across all domains so here
we are kind of cheating a bit we are
including time as another domain so K is
kind of like and this discounted and
dimensional preference curve and an
example of the prismic curve you can see
on the top right corner and then k
equals zero if the mechanism is
powerless so then what this implies is
that by forming a larger Collision means
the correlation has a higher K and this
enables them to do more credible
extortions
so what this means is that the Monarch
is red value for your Collision of
Agents you know forming the mechanism m
equals to K multiplied by the original
monarchy Family Medicine forms the grand
Coalition so then uh of course this
implies the users can also be the
Monarch if they have a large enough K
right and similar probability
researchers or Builders you can imagine
different mechanisms than what is
currently being played in the Meb field
so
essentially the inter-domain correlation
Factor represents your collective
bargaining power which determines how
the Monarch is set up who we thrown as
the king and how the Monarch is set up
within the game
so then however the okay so so
there are some caveats to the choice you
know how much coalitions can you have
right so you can imagine this formalized
as a corporate game where the core of
the game might not exist if we have too
many inter inter domain correlations so
uh this kind of reminds us as the you
know original notion of there exists
anatomicity of coordination and in and
efficiency and this also relates back to
you know a notion I would like to call
the incompleteness theorem of Meb ratio
so you can see that
the game e cannot continue if there is
not enough competition what this means
is that you can increase the
coordination but it does not always
increase if efficiency of the allocation
in reality and even if you try to
eliminate the efficiencies caused by
your extra coordination by using some
another credible commitment or
coordination device in The Meta game
then you're just transferring the
monologue its credible value in the
original game to the Monarch in the rapt
game right so this kind of provides a
ground for us to refute any you know uh
previous ideas by Virgil Griffiths and
his whole ethereum as game changing
technology argument
um so then the uh coming back to this
the specific value of the correlation
Factor K depends on how we set up the
game we can throw out these from
different monarchs ultimately we want to
choose the best mechanism and and start
that is most incentive along with
long-term prosperity and is most capable
of coordination so you can see there's a
trade-off over here and of course like
why do we want a manner why do we need
this meme right why can't we just go the
formalization reality in a full
formalization throwing Mass equations uh
so the reason for this monarchy
abstraction is because the outcome in
contrary to traditional mechanisms and
the outcome in Mev is not common
knowledge and depends on each agent's
private information which the other
agent don't have priority don't have
priority Mev time which is the
allocation time or like block building
time so it is hard to analyze the
equivalence in this game especially when
there is exists and a smear as symmetry
in the sophistication of Agents so thus
we reduce the guarantee
of of our mechanism to just have some
some bounce like some some loose bounds
on the incentive compatibility and the
individual rationale
so then now to concretize things we
provide some case studies so
specifically we say that there's uh we
know that there has it has been vanilla
first come first serve and frequent
batch auction style first come first
where we increase the fairness
granularity within the receive other
fairness protocols so what they
specifically means is that instead of
reporting a strict ordering by the
receive all the time of the transaction
each individual node now reports a
partial ordering to the leader of the
ordering consensus protocol so what this
concrete means is that you know you just
take the smaller than to smaller or
equal to and then after aggregating each
individual knows preference the Monarch
in this case the leader of the consensus
protocol gets a week ordering by first
come first serve and then there are of
course we know there there must exist
some other batches in it which is caused
both by the conducted paradoxes and the
initial partial being reported by each
individual node so now the Monarch tries
to resolve the order of the on or the
batches using auctions right so this is
why it's free from Dash auction uh and
then in reality why is this model like
let's speak into some datas we see that
in reality it's over 65 of the unit
volume is comes from Arbitrage it's you
know maybe statistical and among the
other 35 it's a big a few few market
makers so what this means is that the
MAV activity constitutes a huge amount
of ethereum activity and the burst
period on ethereum which arises from
public information reviews so for
example some price discoveries having
some binance for some people
um some wells and The unpride Hectic
transaction into the public member uh
then uh once once it this kind of event
happens it takes around 1.2 seconds and
and 75 of the conflict of preferences on
ethereum conflict presence is meaning
that there is a conflict within what
specifications should the next day
satisfy uh uh you know it happens less
than four percent of the time and so
this means that vanilla first come first
serve compared with frequent batch
auction first compressor will be pairing
the action activity tonalities which
cause worse ux higher fees for users or
centralization in the nodes from 12x
more conflict of preferences so you know
bursts of periods per preferences are
significant and just adding some partial
ordering just covering that little four
percent window you can mitigate most of
the negative externalities on the domain
you can take value back from the
monologue right so if we use the three
EV framework to compare those two
protocols we can see that
they have the same Mafia right uh and
and for marlocks the the first the
vanilla version has much more monologue
because uh the vanilla version nobody
can express their preferences in a short
burst period which constitutes most of
the activity right so so the monologue
arises from the tribute to the monologue
arises from on coordination and then
Ultra simplify social Choice function
right where the spiritual Choice
function is like IO like I choose to
preference by the other I receive them
that does not coordinate any of the
first period Mev right and then burst
period and maybe you know typical cases
include like permission SMU price
Discovery automatic so uh and then so as
you can see from the graph on the right
right like we are transforming the mafia
slowly into the model aquarium where the
value is transferred to the user so the
users have the same payoff you know same
bad payoff and then from the Monarch
it's strictly worse right but better
definition but also uh vanilla versions
from the ROM on work right so in in
latency games you pay more to AWS or
Google Cloud because you know you need
to play latency games and SAS and the
Monarch you know Google and Amazon are
obviously nothing incentive aligned with
crypto or like whichever domain you
adopt your audience and of course it's
more centralized because camera is like
fan
um uh okay so now come some concrete
examples let's see you know
transformation of three if it does
really actually capture most of the uh
existing and maybe Notions that we have
so for transforming Mala to Monarch we
see that one form of this is a spread
charged charged by market maker Bridges
from Monarch to Mafia we see that if in
traditionally if in previous ethereum
profile work the miners were to go Rogue
and still bundles they need to be you
know they were the Monarch but they
choose to gain an advantage using their
estimation information the ability to
act on that information
wait what okay uh and then from Mafia to
malloc the transformation so for example
you go from a public member model to a
vanilla first come first serve right you
eliminated so you don't have that
information but you have that uh you
know uh on coordination you have a a
very bad allocation of preferences which
increases monologue and then from malloc
to Mafia you'll see that so for example
if a malicious coordinator were to
pocket all of the Surplus with that that
it generates from optimizing the
ordering or just existing you know from
coordination so this case uh you you you
go from yeah and then what we can do to
go from uh Mafia to monarchies to have
programmable privacy right so in this
case for example SGS you can still do
bundle merging or block building or
preference aggregation despite that you
don't have a Elementary symmetry in the
um information
and then finally come on the current
model of Dow governance is a form of
transforming the Monarch to the malloc
which is not good right so uh so so what
this means is that so that exists for
coordination right but then but
launching a dollar token and then
allowing it to distribute under bad
economics or like whatever you're you're
creating a Ponzi which uh creates more
monologue right you could have got that
to a monarch stage but then through more
decentralization you have recreated his
monologue in The Meta game of the token
game right so this reminds us of the
previous example of the non-monatonic
relation between decentralization and
coordination and efficiency in the
mechanism
um so then some implications of three EV
right concretize this idea what why is
it useful so then the solution recipes
how to achieve zero percent zero percent
and distribute to 100 we can solve Mafia
EV using programmable privacy which
allows for expressivity and agents can
control how the information is used
along the path of the determination of
the outcome buys among narc also this
relates to the traditional mechanism
designs idea of the definition of How
It's what how expressive a mechanism is
right and then concretely what this
means is that you can devise a mechanism
for discovering the unsophisticated
user's preferences and helping them to
communicate this preference to the
coordinator or to the mechanism and then
we can solve malark historical value by
just increasing memory efficiency right
we can eliminate the price of energy
while via refinement of society or I.E
specialization of Labor so what you can
see you know in in this example is like
a contrary to the idea of monarchy has
the idea of a slack right so slack is
arises from coordination where it's
basically you you allow somebody to have
enough
um modes or like period where they can
grind on the higher payoffs
and this is only allowed if you have a
highly coordinated you know
specialization of Labor in your society
and then finally Monarch his travel
value how do we division its value right
so the value division we should division
it in such a way such in that we
maximize this welfare or the future
returns so what this means is that you
probably shouldn't focus on giving tiny
Kickbacks to the existing one percent of
users but instead of focusing onboarding
the invisible 99 percent of users as
as Monarch expressable value or like I
mean in general grows super linearly
with respect of compared with the number
of other flow that's existent on your
domain right so for example the ways you
can do this is through investment into
what is or some some idea like ritual
active public goods funding and of
course this was the original idea by
feral living as well right like the the
idea is that you can uh there are 99 of
users that would have come to your
domain a few other things you know
fairly but uh
um yeah yeah so so it's it's been on as
a narrative and then uh yeah and so so
then
specific implementations we know that
3ev was defined by the source of value
at their distinct so the thing however
the sink of those value are different so
for example the mafia Extra Value
sometimes thinks into into Monarch right
so for example when there is a sandwich
the and then two very competent atomic
structures in the various things to the
Monarch which is the validators and then
the think of value impacts the source of
value so I argue that by controlling the
sink of the value we are control we can
already we can also impact on the source
of the value whether the magic of
credible commitments so some example
credible commitments I'm not going to
explain that you can like hit me up
later after this talk examples include
Builders as roll-up or if they you have
a special Builder Innovation where you
grind on the expressivity of the
building language or you have a
decentralization of building you use sdx
tokens to align the incentives or like
some more fancy things but all of those
conditions on all of those Solutions can
conditions are low enough interdomain
correlation Factor right remember from
before once you have too much
correlation or too much coordination
then you can't possibly you know have a
good mechanism or like it's very hard to
do so so uh and that allow a low enough
factor means that you have high enough
competition which means the market is
contestable so
I claim that having more competition in
the game by incentivizing having more
competition in the game is Right curve
behavior and optimizing the ordering by
learning more about the preference
microstructures and then grinding on the
design of the mechanism is mid curve so
contestibility is an important tool and
it can only be realized if we design the
initial Market in such a way that it is
not centralizing what this means is that
in reality what this means is that there
should not like like we should
definitely devise a mechanism that were
exclusive exclusive other flow within
like this provide some philosophical
foundations for the previous talk right
I said it's mid now it's time to you
know show some real work for show some
real like tests for non-ammy venis uh so
then remember that uh Fraga and Russell
was debating why you know whether the
king of French was both right in the
beginning of 20th century and they come
up with the tests for presuppositions uh
for utterances of sentences so for
example the utterance of the sentence
access Mev has a presupposition uh test
that there must exist again e and then
like allocation or other protocol uh M
and that within M and E using the three
EV definitions we can indeed see that
um is constituted by a type or multiple
types of the three EV so in so so in
this sense the utterance of X is Mev has
a presupposition of the existence
condition of enm and X being indeed
instead of 3v thus if there does not
exist such a enm which you know
translates into English is that is if
that is absence of a monarch then the
utterance of this sentence axis and EB
is false and that's the X is not Mev so
then some concrete example imagine Kim
and Dawn playing a prisoner's dilemma
right so then they both choose to be
trained now Suppose there isn't a
coordinator okay so then somebody utters
the sentence he says that the value that
Kim and don't is extracting apps in the
Monarch I.E 1 1 is not Mev then this
then this value is indeed not that maybe
by passing the presupposition test right
if we take a free game view
um and so of course like there are other
countries like Wittgenstein has this
notion of a language game where the
context depends on social scene so the
utterance of actually some evid so this
sentence might be true as the context of
the authorency social and we might agree
on some notion of the game so if the
sentence is provided without context
then the sentence is nonsense and has no
choose value thus ultimately the test of
Mev conditions on which philosophical
interpretation of language you agree
with if you are Wittgenstein you know
you always switch with Einstein and
believes that the utterancy is within
the context where it is socially
agreeable that a monarchy exists so in
the previous rugby case remember
we often see let's say that physics is
the monarch and then over there is a
value is indeed and EV
um okay so so now some takeaways let's
change the language it came are you
tired about minor or Maximo where the
grammar isn't even correct like like we
say maximum mov all the time and we
should just say I'm EV and it
conveniently represents a shorthand for
some type of Mafia malloc monarchic
straddle value right have you been
saying a movie because you have poor
imagination to come up with a
replacement term for miners that keeps
the m and makes sense you know is is
that what we are doing you know uh so
then the argument is that by changing
this language game we have several
benefits we have
um you know this from my formulation
gives you a distinct value which Origins
from the source and then it is more
formalizable and it is formalizable in
the sense that you don't get lost in the
details it is still keeps a meme and the
formalization and the proof only serves
as a social process to help people to
understand it and then of course they
settles the better Mev argument and the
trade-off or the transformation between
the three values of space is clear what
this implies also this implies clear
solution recipes so some nurse sniping
for you all that is that to research on
how Monarch historical value can be
distributed and research on the program
of privacy solutions for Mafia IV and
then finally a pre-supportation test and
so to
conclude I would like to hypnotize you
3v3 ev333
um that's all you can kidnap
well I think we all agree that was a
fantastic talk a lot of like the two
speakers we we said at the beginning
that maybe we have time for questions so
let's pick a couple of them order it's
going to be hard for me to get there so
maybe you can shout out aloud
yeah good question so of fact censorship
uh can be done implicitly using a
terminal using a form of the
um preference curves but Alejo Maybe
um is it Monarch is it Mafia or is it uh
molok MVP it is monarch
yeah but as I said like what we want is
to shift the structure of the game right
remember the interdoming Coalition
Factor you can unify the users by
devising some mechanism to help them
become sophisticated and have collective
bargaining power so that is what we
ultimately want to do yeah
anyone else
all right guys so big round of applause
[Applause]