foreign
[Music]
all right everybody hello hello it's so
good to see everyone I haven't been in a
stage like this in about three years
since Devcon Prague back when I was in
obscure PhD student and giving a talk in
a similarly sized room that no one
showed up for so very emotional to be
standing in front of you all here as the
steward of flashbots and looking at how
much has happened in our industry in the
last three years I also am a PhD student
at Cornell but this talk is in my
capacity as flashbots
so today I'm going to be taking you all
on a tour through the Dark Forest and
this is actually the Dark Forest where I
spend my time where I live right so I
know I'm taking the meme a little
literally but I'll also show you some
pictures I've taken in my journey over
these last three years finding nav and
really trying to fight for uh user
fairness
um so I learned in teacher school that
some people only learn well with an
outline so we're going to talk about
three things today the first one is
where did Mev come from why are we here
second one is where are we today so I'm
going to talk a lot about flashbots and
the choices we've made as a collective
how they relate to things like the base
layer of ethereum security and fairness
for users as well and I'm going to talk
about where do we go so what is the goal
for Mev what is flashbots doing this is
a question I get a lot from the
community and we're going to start to
answer it today and how can we all do it
together as an open source as an
ethereum Community to really build these
systems for the next trillion I'm not
kidding about that
um so this all started for me with this
academic paper I wrote at Cornell called
Flash Boys 2.0 where we looked at the
market dynamics of several dexes that
were popular at the time around 2018
2019 and we looked at basically the game
that Bots were playing to Arbitrage
these decentralized exchanges and how
they related to things like user
fairness and consensus security using
extensive measurement infrastructure so
if you're interested in that and you
haven't read that paper yet I highly
recommend you check it out but in that
paper we Define this term called Mev
maybe you've seen some talks on Mev at
Devcon here so we Define this as saying
oo fees or ordering optimization fees
represent one case of a more General
value we call minor extractable value or
Mev and that refers to the total amount
of ether miners can extract from
manipulation of transactions within a
given time frame which may include
multiple blocks worth of transactions
um so there's a sort of Duality to Mev
that we've been exploring and pointed
out basically after this paper we're on
the one hand Mev is this financial
potential energy that runs through
everything we build every system we
build
um and on the other hand it has risks so
what we said in the Flash Boys paper was
Mev poses concrete measurable consensus
layer security risks and we show that
Mev poses a realistic threat to ethereum
today that was four years ago so today
it's even even more so so how do we get
to a place where we preserve the
decentralization of these systems we're
building where we make sure that this
Mev is used for good and not
centralization that it doesn't entrench
actors into our systems which are not
aligned with user fairness how do we
make sure these systems actually work
for the people that are using them
uh well there's one simple answer to
that and this photo is actually from a
hike I took after Devcon Osaka again all
these have like a little emotional story
for me so I'm kind of indulging myself
here but we do that by playing the long
game
um so this is what what I spend my
entire time kind of for the last three
years obsessing about what is the long
game of Mev and how do we get out of a
world where we're all captured by
Citadel where we're all captured by
Robin Hood's new crypto wallet where
we're all captured by metamask where
we're all captured by flashbots or a
centralized Builder this is the world we
need to get away from and we need to
play the very very long game here so
what am I doing about this well one
thing is uh stewarding this project
called flashbots which we announced in
this blog post called front running the
Mev crisis and it has three goals number
one illuminate the Dark Forest Mev when
we started was an opaque obscure Niche
area that no Searchers wanted to really
talk about publicly you couldn't get the
kind of data in The Flash Boys 2.0 Paper
without doing months of academic
research and that's not good right we
need to communicate to the community to
the users and to everyone exactly what
is going on in these systems and exactly
how it affects them so that's
Illuminating the Dark Forest the second
thing we need to do is democratize Mev
extraction so if we want to preserve the
decentralization of the systems we're
building we need to make sure that our
validators aren't these vertically
integrated monoliths that essentially
operate as hedge funds that would be
basically a worst case scenario for our
Network it would be a direct capture
opportunity for entities like Goldman
Sachs Citadel Robin Hood Etc who you
already see moving in this direction on
ethereum today right so we need to make
sure that Mev extraction and the
benefits of Med extraction are available
to all and the last one is to distribute
Mev benefits so it should not be the
case that only the users or only the
validators are benefiting from this
concept
all right let's talk about where we are
today uh this is a picture from West
Virginia also a very dark Forest it was
cold there
um so now we're kind of on the heels of
the ethereum merch one of the largest
most massive system upgrades we've ever
seen and flashbots has been working
towards decentralizing itself so before
what we had was a vertically integrated
Builder where it would plug directly
into get itself and basically build all
blocks at that point we were building
upwards of 90 of Mev Laden ethereum
blocks and we decided to democratize
this further by splitting this role into
several interfaces with many
participants and this was a direct kind
of attack on centralized buildings
Builders sorry to let new block Builders
and new entities that wanted to
participate in Mev have a direct channel
to connect rather than needing a high
upstart kind of Legally heavy world the
way we see in Trad five people which I
consider highly sub-optimal so what do I
mean by decentralization so this this
picture is actually a perfect example of
it what we need to do to decentralize is
build many many parties with many many
utility functions that work on the
system together and that cooperate and
these parties need to have meaningfully
economically distributed power so that's
what we're working on after the merge
the adoption of this system has
currently reached about 56 percent of
all uh all uh kind of ethereum blocks
and flashbots dominance currently on
this system is at 81 it's a number we're
kind of actively looking at here and you
can see that you get a you get a quite
substantial uh validator payment Boost
from running this system so generally up
to like 300 percent of the fees you'd
make otherwise but often spiking as high
as even 80th in some blocks
um okay so that's great Phil but how is
that Illuminating how are we doing today
on these three goals illuminate
democratize this tribute and and what
are we doing here so the first thing
we're doing at flashbots is we're
aggressively committed to open data we
believe open data is the only way to
escape centralization and get to a
decentralized fair Universe
um in that regard we've been pioneering
much of the data used by a lot of the
ecosystem on Mev it's very hard to read
an Mev article without seeing flashbots
data quoted therein and we provide open
data on both public goods blockchain
transactions that do not flow through us
as well as transactions flowing through
our node not only are we a leader in
this space ourselves but we also have
inspired many other parties working in
the Mev space to start by releasing
transparency dashboards which was
Unthinkable three years ago so several
other companies that are doing this
include Western gate jump skip zero Mev
and much more inspired by the
illumination culture of our Explorer and
we're taking this past the merge with
Rich public data from all the
centralized infrastructure we're running
as well as dashboards where people can
see how this infrastructure is kind of
progressing and we're going to continue
this culture of open data and
illumination through this talk through
proof of stake and through any future
we're in one last thing I want to say
and this is the biggest font I used in
the entire slide so this is important
you cannot illuminate without research
flashbots is committed to doing research
as a first class citizen in its
activities and having a dual research
and development engine you can see that
in Devcon here you can see the
representation of flashbots researchers
both in the audience and the number of
talks they've provided I recommend you
know looking at the schedule that we've
listed on our Forum with several amazing
talks there and it's extremely hard to
look at an Mev event or an Mev article
or do Mev research without using this
public goods research that we've been
doing all right Phil that's great you
guys are Illuminating what about
democratization
um so democratization is extremely
important to me that means that every
user has to have equal access to the
system uh that we are building here of
Med
and on that perspective much like my
friend little frog I believe we're a
Long Way From Home
um so I want to address kind of the
elephant in the room this is one of the
memes I've heard a lot at the hallway
track of this uh conference which is
ofac so we run a lot of centralized
infrastructure in our systems today that
is not the long-term plan at all but
today we do
um and we do kind of comply with U.S
regulations on ofac which has become a
meme so this threshold actually crossed
51 today
what does this mean this kind of shows
two things number one we've been like
very successful in our mission to
democratize Mev almost too successful
um we've almost grown too quickly to
outpace and build these competitive
ecosystems we're striving towards so the
next thing we need to do is ensure as
much Global cooperation on these systems
and as much diversity of participation
with different utility functions as we
can if you look at what the ethereum
blockchain looks like today this is a
picture from last night of ofac
compatible blocks you can kind of get a
scope of the situation so the reality is
today there are not many uh transactions
that are actually under these
regulations as well as you have about
half of blocks complying with them what
this means is you may generally have to
wait 15 to 30 seconds longer for the
inclusion of a sanctioned transaction
this is not the same as a 51 attack on
eth because it doesn't operate at the
consensus layer that being said it is
concerning right if this number gets
closer to the full proportion of eth
block power that would be kind of a
upsetting for the ability of a lot of uh
parties to get transactions included and
also for ethereum to operate as a system
um and as a foundation
um so how do we get out of this and make
sure that doesn't happen well there's
one thing from me as flashbots that I'm
going to say and then I'm going to go
into really how do we get out of this on
like a technical level so what I have to
say as flashbots is we do not intend to
impose our utility functions or our
legal risk analyzes on the ethereum
network full stop that stands against
everything I believe in it stands
against the last seven years of my
participation in this ecosystem in the
last 10 years of my participation in
cryptocurrency in general I'm here for
censorship resistance everyone who knows
me knows that and I I've also researched
this issue you know long before ofax so
how do we get out of here we believe one
key tool is open source so open sourcing
as much of our infrastructure as
possible is the only way we get out of
this centralized Builder morass right we
need to make sure that people can easily
build this technology that the barriers
to entry are low and almost non-existent
if we want to have a diversity of
participants A diversity of competition
and meaningfully economically
decentralized power in the systems we're
building
um so this is something we're actively
working towards here so this first graph
is an adoption graph you can see on the
bottom basically the adoption in purple
of the Mev boost system on each blocks
and it's steadily increasing an adoption
adoption as we reach 50 but if you look
at who's actually building these blocks
where that bright purple bars flashbots
here you can see a number of new uh
industry players are coming in to uh
building blocks and as well as relaying
them we have several relays as I showed
you on a previous slide
um and this is to us key to
democratization so in our opinion the
relay is not a piece of software that
will exist in two or three years it will
be replaced by PBS or more sophisticated
kind of interfaces on the other hand the
Builder is extremely concerning to avoid
centralization in because of the
entrenched incentives in that level of
the stack so how do we avoid
centralization open sourcing is one way
supporting our competition is another
and a third way is making sure we Lobby
aggressively the entire ecosystem them
to avoid entrenching centralized choices
like private or exclusive order flow
into the way they do business because
these will destroy the system that we
love as a whole
um okay Phil so how do we get out of
here well like any Forest when you're in
the middle of a forest and it's dark the
only way out is through
so
come with me on a journey and let me
take you through uh where we are today
so the first thing we're doing is on the
left we're supporting not only Paradigm
as our partners but many others who are
asking these hard social and legal
questions about the base layer about
validation about how this impacts
everything we're building we're
supporting them as much as we can with
discussions with engagement and and in
many other ways
the other thing is on the top right you
can see part of a tweet storm of mine
where I talk about how to actually
achieve censorship resistance and
neutrality through decentralization
through Geographic distributions of the
preferences of different utility
functions
um I don't think you can pressure any
one validator to be decentralized and I
think that will ultimately make you more
centralized if you knock on coinbase's
door and you say guys you have to shut
down now or you have to like mine
transactions that will get your public
company sanctioned by its relevant
authorities that's not how you build a
maximally robust system that's how you
push your system to the edges this is
Mev for the next trillion we're trying
to go to the whole world the entire
Financial value of the entire world here
so we are absolutely trying to go beyond
the preferences and utility functions of
any single player
um the other thing we're doing is these
are research posts you can read from
vitalik and our team that we've been
engaging on for a while on how do we
bring back the status quo of proof of
work style censorship resistance where
the validators have Agency on choosing
only builders that are not censoring
while maintaining the revenue that they
can see from Mev optimization so we
don't want to make validators choose Mev
optimization or censoring we want them
to be on whatever point on that
trade-off point they want to be at and
we want to incubate as many points on
this graph as we can and how do we do
that we do that through research again
research is absolutely key and we cannot
get out without it alrighty so much like
tree roots the last step is to
distribute this Mev to our entire
Community organism in this room so here
is actually the the part we've done the
least work on but the part we're really
going to focus on next so we do have
this product called flashbots protect
which you can plug into your metamask
and and essentially get the benefits of
private Mev auctions
and and extend these to all normal you
know retail kind of users of blockchain
so that you don't need to be a
sophisticated party to access the
benefits of what we're building at
flashbots but we have a much much more
richer set of features to come on this
front and I'm going to talk about that
next the bottom line with distribute is
we've been too slow like I'm not going
to lie with you we must do more here and
I think the other two have kind of Taken
priority but it's time to kind of make
sure we really give users the benefits
of this Mev so my guess is in a year
people are going to be happy to be
sandwiched because they're going to be
saving so much money on their
transactions so don't call it a sandwich
attack call it a sandwich and let's make
sure it doesn't lead to a centralized
Builder world
all right let's talk more about walking
out of this Forest over here so where
are we going so this is how I see the
the Mev Marketplace as a user validator
Supply demand optimization problem where
the user wants to minimize the fees plus
Mev basically the rent it's offering to
the system and the validator wants to
maximize this basically the Commodities
offering to resolve this potential
Financial energy of our our universe
into a single collapse discrete state
um so what do we need to do in this
market we need to make it more private
privacy is the key here you can't have
freedom without privacy we need it to be
more decentralized economically
meaningfully decentralized we need it to
be more competitive geographically so
one actor cannot dominate the
preferences of the system
we need more user tooling so users can
be sophisticated on their side of the
Curve
we need a market that's more robust
efficient and geographically diverse to
me this is self-explanatory if we're not
building towards these three goals we're
going to fail
and we don't want to have externalities
on the ethereum network Corruption of
the validator set changes of incentives
and proof of work or any of these other
kind of externalities of Mev and we want
to maintain the success of flashbots in
democratizing Mev to the Searcher
Community already and prevent first
party deals between Searchers Builders
relays and other actors in the system
these are best done when you communicate
on a technical not a political API and
that's what we're aiming to build so WTF
do we do next at flashbots well we're
going to decentralize the crap out of
this thing that's the answer so we are
here to avoid entrenching centralization
at every step this is my commitment to
you as long as I'm here in this
community I will be working whatever the
status quo is to further decentralize
power in Mev in an iterative way and I
expect every single person in this room
to hold me to account okay now you can
clap some
so we're not going to end up owned by
Citadel no no I'm not done sorry sorry
just a little Applause
um so what are we doing at flashbots
this is the question every Community
member asks me and today I'm going to
answer it for you and please kind of
follow up with me and start the
conversation
um we're building a project called
codename Suave it's something we've been
working on for kind of the last uh
almost a year now and that we're going
to be releasing iteratively to the
community and building towards further
it is not an end state but an initial
state to start the conversation about
how we decentralize this existing
ecosystem that flashbots has built to
all of our friends all of our
competitors and all the other projects
in the space
so what is suave Suave is an Mev aware
privacy first encrypted mempool for
users and wallets so Suave will make the
maximum leverage of a user's economic
value to force the system to provide
them fairness essentially and vice versa
as a negotiation tactic in this market
it features Progressive decentralization
so along with the iterative steps on our
centralized infrastructure that we're
going to take towards Suave we're also
going to have a very clear decentralized
roadmap that we expect you again to keep
us to account on
and for our friends at roll ups l2s you
know any other whatever you want to call
them side chains multi-chain we're going
to give those uh actors a turnkey
decentralized block builder for both
their validators to maximize their
revenue and for their users to maximize
the output of their economic
transactions without entrenching further
centralization into the roll-up or into
the uh other chain so this is very very
important cooperation without
centralization is what we're doing here
um I'll give you some more keywords
about what we're building and spend a
little bit of time kind of ranting about
each one of these so first is a fully
decentralized block Builder we stand
against centralization in the block
building market and I know that may seem
inconsistent with our previous views but
it is my belief that the only way to
achieve decentralization is to front run
the Mev crisis and credibly decentralize
every modular component of it this is
going to be a fully open source system
that's going to be developed in the open
so starting in about a week we'll start
releasing information specs possibly
even prototypes and code we'll see two
weeks TM right like for for users to
play with
and we want you to come discuss with us
that's what decentralized means if you
consider yourself a competitor of us we
want you to come to the table and we
want to build this together because we
really believe truly that the best
outcome for the space is if we're all
doing this together rather than fighting
each other in zero-sum games
um it's going to be ethnative so that
means aligned with the eth validator set
and intended not to corrupt the
validator set of ethereum or impose
things like undo token incentives or
other centralization risks on the evm
layer and it's going to be fully evm
compatible to kind of bring the benefits
of all these evm chains and their
interconnectivity to Mev
we're going to provide optimal user
execution that harnesses Mev so we're
going to use Mev as this decentralized
engine in the long term to make sure the
users get really the best execution on
their trades in a way that's really
going to make tradfy look embarrassing
very shortly in my guess
um we're going to offer full
compatibility with flashbots today so
many of you may search on flashbots May
relay blacks blocks to flashbots may do
whatever
um and we want to have full
compatibility with that system going
forward
um we want cross slash multi-chain
support so this one is kind of
self-explanatory I mean everyone asks us
are you going cross-chain are you going
multi-chain come on what do you guys
think of course like um yes but also
ethnative and etherlined we think this
is the key combination for these systems
in the future so they serve the whole
world not just one area or one set of
clients or people
um last thing is we're going to maximize
competition and Geographic diversity so
this is the most important point that I
kind of wanna everyone to leave today
with is we don't get out of the Dark
Forest unless we have competition and
Geographic diversity and unless both of
those are really meaningful so we can't
build systems Solana that uh for example
privilege certain economic zones or
require you to have low latency to an
existing set of infrastructures because
then we lose out on the benefit of these
Global utility functions and the amazing
cooperation that these utility functions
enable so every step we're going to take
is going to be intended to maximize this
competition
we're going to enable open order flow
for ethereum's future
what is open order flow open order flow
means no first party deals between
wallets Builders and or validators
because we believe that these first
party deals in tradfi have led users to
have absolutely horrible execution and
have entrenched extremely predatory rent
extractors rent extractors if you will
and the last thing is we're going to
have programmable privacy so how do you
achieve all this how do you give users
back their bargaining power they need to
have control over what information
they're giving and that only comes
through privacy it's it's one tool that
we need to get out of the situation
we're in although it's not quite enough
by itself uh for reasons that will
become you know clear over time so this
to me is the Genesis of a new phase of
Mev a new Cooperative positive sum phase
of Mev to get us out of this zero-sum
negative centralizing uh ecosystem that
we're headed towards even though we have
avoided vertical integration we now need
to avoid Builder centralization so that
will be the next job of flashbots
I want you all to help please please
please please please please please
please every person in this room let's
you know all these photos are from my
hikes and when you're on a hike the best
thing you can do is get to the top
because then it's all downhill from
there it's all nice and easy the Cool
Breeze is Flowing on your back so I want
to hike with you all we're going to have
to climb the mountain first I'm sorry
it's not going to be easy but we're
going to do it we're here for years and
years to do this together
especially if you're a user a wallet or
a roll-up we want to be talking to you
now about centralization in your system
and the rest of the stack we're hosting
a round table on this later today so
please reach out with an application if
you're interested in that lastly please
check out our Forum where we make all
these discussions and come troll the
crap out of us about ofac centralization
competition unfairness
you just Hammer us you know please
please so we really want you to
participate in this because you can't
meaningfully diversify power without
diversifying participation so we look
forward to talking to you all and
hopefully this makes you feel a little
better about us not being like the evil
Goldman sachsborg that censors us all
thank you
that's awesome we have time for one or
two questions
make them spicy yeah
there is another there is a question
here one and two hey
um thanks Phil great talk
um
so I think uh talking with the community
recently one sort of trust issue that
people have with flashbots is
um you do all this great open source
work and it's not quite clear what's
like the end game what is the way you
make this into you know something
sustainable profitable for flashbots
obviously there's a research Collective
there's also accompanying your
foundation or some sort of of entity
there so can you talk you know to people
about like what is flashbots the company
organization trying to build and how do
you see yourselves integrating with that
ecosystem in a way where like others can
also thrive the truthful answer and this
doesn't satisfy people internally either
as we don't know yet we think it's too
early in this market and there are too
many kind of variables and competitors
to make a call without entrenching
something that further provides
centralization in the long term so we're
intentionally avoiding that people ask
like what do you pitch the VCS why do
they invest in you well we pitch them
like look guys you own eth we're going
to solve this problem for you and like
do you want your eat bags that are worth
100 x more than us to go to zero or not
and yes we also pitch them that we do
want to be sustainable because as a
mission-driven organization if we're not
reasonable and sustainable we won't be
able to to continue operating so that
the more specific answers I think
there's three things we still need to do
at flashbots and they were all on that
slide so one of them is to decentralize
ourselves completely and meaningfully
and economically one of them is to
enable benefit to be redistributed to
users much more efficiently than it is
today and the third one is to enable
support for any zone or trust domain in
the world that wants to use flashbots
without harming the centralization of
ethereum those goal are still open
research questions and once we've
answered that we'll look into to being
sustainable and reasonable and
monetizing I realize it's not a
satisfying answer but personally I would
rather die right now than entrench
something shitty so it's kind of what
we're going to be doing we're also going
to announce much more about this in the
next month or two because I understand
this is a question people have it's a
question people have internally as well
so totally reasonable and totally
understood
hi
um so I was wondering how do you think
can small Builders become competitive
with the big ones
uh because it does seem that order flow
is a very strong centralizing force
right and if you just have more orders
you can build more profitable blocks so
this is what decentralizing the Builder
role is about in the future I don't
think there will be such a thing as a
monolithic Builder that builds a whole
block that's kind of the future we're
working away from what we want to build
in the future is much closer to a
network of Searchers that eventually
chaotically kind of produce this block
hash output and in that case any
economically meaningful information that
you have in any possible strategy in any
way can be expressed into the system
without kind of ruining its
decentralization properties so I agree
with you open order flow oh sorry closed
order flow does make this whole thing
like much more centralizing that's why
we want to get rid of it and that's why
we want to move into systems where any
Builder no matter how big or small can
access the order flow of the biggest
parties in the space you know metamask
coinbase whatever else like that would
be how you get out of that equilibrium
you make the order flow Democratic as
well as the Mev extraction API
and that that is what we're working on
so
okay thank you very much Philip was an
amazing and awesome thank you so much
for having me