[Music]
well thanks for the intro sorry for
rugging I've changed the title and the
content isn't that different but this
was more exciting um cool so um I'm
Mariam I work with ritual uh this is
based on joint work with naven uh also
at ritual and
Columbia so let's get into it okay so
one mental model for for uh what
blockchains do for us is providing this
fundamentally new uh primitive uh which
is permissionless verifiable computation
on a shared Global State and this
computation is sold in these indivisible
units called
blocks so you can think of that as a
supply side of this exciting New
Market and on the demand side we have
users who want to use this comp
computation um so this is all the apps
all the people whose uh happiness and
Welfare we care about and we want to
onboard and naturally we need a fair fee
Market to sit between these two sides
supply and demand and ideally uh figure
out how to allocate Supply to demand and
how to price things in an efficient
way and everything would be great uh if
the picture was just these two sides but
there's a third set of participants in
the system called agents or what I will
call agents and these are not users or
the computation providers uh they are
facilitators of the market but the role
is pretty complicated they can be useful
they can be adversarial and I argue
they're necessary and the reason they're
necessary is that to get the
permissionless verifiable all these like
new properties of blockchains we need
decentralization and that means we need
to distribute power to like
geographically and across nodes and that
means every part of the blockchain
including its fee Market might be run by
a selfish party with its own objectives
so we need to design markets with um
these agents in
mind this this is a nice diagram by
Frontier it shows just how complex the
ecosystem of Agents involved in Block
building is they have specialized they
have uh into like little parts of the
market and and um yeah like have a mixed
influence I would say on the quality of
um user
experience and I guess this is kind of
at the core of what me is um these
agents have a different set of
objectives than the network or
users all right cool so here's a
narrative that I think is pretty
prevalent and it's that agents are bad
and M is toxic so I will just outline
the narrative um I think it will be
familiar um so these agents have their
own objectives they have outsize control
over block
production and as a result I guess first
let me show you the outsize control this
is I took this maybe an hour ago um the
most recent ethereum blocks are built by
two Builders um that's not fully
decentralized and because of this
potential incentive misalignment between
agents and users user welfare can suffer
and this is a an old tale that has been
told many times I will mention this
paper that um we kind of formalized this
the the challenges imposed by this
incentive misalignments where we show an
impossibility of Designing any like no
matter how clever you are you can't
design a good market so that this
incentive misalignment doesn't cause
issues the user welfare will always
suffer
okay so in response to the evil agents
and bad me people have um taken some
approaches to um reduce or mitigate or
democratize me where reduction is at the
app player let's make new applications
let's use batch auctions um instead of
like the amm we use now just to have
less me less value available on chain
for these block producers to extract um
mitigation is things like encrypted men
pools sve this is where you tie the
hands of the agents limit their power so
that they don't have that much leeway to
extract value and democratization is
kind of throwing your hands in the air
and saying this evil is inevitable it
will be there because there's this
degree of Freedom these agents have so
at least let's try to reduce this
negative side effects let's make sure we
don't get censorship
uh let's make sure that at least the
validators validators are
decentralized so I think this is kind of
um the lay of the land and what I hope
to do here is give some form of a
counterbalancing argument I'm not going
to say agents are amazing and there is
no Meb issue but I'm hoping to argue
that agents can be useful and sometimes
crucial to use and M is more Nuance than
just toxic and
evil and I guess more concretely I will
give a framework I will Define this
concept of agentic ism and we can give a
framework for how to talk about the
degree of agentic ism in different block
production paradigms and then follow up
with a way of reasoning about for a
specific application or chain how do you
choose which block production Paradigm
to use more agentic or less a
gentic cool let's get into definitions
um so automated is something I haven't
mentioned I'm using that as the opposite
of agentic so let me Define what it
means to be uh an automated block
building um function or Paradigm you
have users they insert transactions into
a me poool called M this M Pool then
there is some function that looks at the
menol and generates a block as simple as
that so there's some let's sa in
deterministic function that goes from
the men poool to what the final block
will be the point is there are no agents
in this slide at all no one has power
over what goes into the block so an
allocation rle is automated if it takes
this format it's a function of the men
pool okay so a gentic block building we
have this second category of Agents they
also give an input to this allocation
rule and their input is
abstractly defined here as a vector of
actions they're sophisticated their
actions can be complex and the point is
that this function now depends on the
actions of the agents this is very
abstract not very useful but the point
is that depending on the structure of
this function agents can exercise more
or less power over the output that is
the block so let me now Define what it
means to be agentic it's defined as a
relation we say an allocation rule f is
more agentic than an allocation rule G
if um I guess maybe the picture is more
useful if the set of blocks that agents
can generate just the range of blocks
that they can generate is a super set of
the range of blocks of the less agentic
one so this is saying G is less agentic
because if um the agents collude
together and range over all possible
action vectors the set of blocks that
they can
generate is limited it's a smaller
set good so that's um and the definition
of agentic and automated and naturally
there's a spectrum from agentic to
automated so let's throw some example
projects onto this I will throw some
acronyms don't worry if you don't
recognize them the hope is that if you
do recognize any of them hopefully it
will help you understand how the
Spectrum works but it's not important if
you don't recognize them so at the very
agentic end I've put in Bitcoin and
salana and why do I what let me actually
the way the Bitcoin fee Market Works in
case you don't know it's a first price
auction transactions submit bids if
they're included they pay that bid there
is no restriction on what the minor can
include in the Block it's agentic
because it's just not restrictive the
set of blocks that the minor is able to
create is just all valid blocks so
Solana similarly doesn't have any like
the protocol doesn't impose any
restrictions on what blocks are
valid and ethereum I think is very close
to the agentic end uh it's almost a
subtle Point why a59 is slightly to the
right because currently a valid block is
not allowed to include a transaction
with a bid lower than the base fee so
that is some form of restriction maybe a
block producer wants to include a maybe
like there is me in a transaction they
want to include a transaction and
subsidize its bids
that is not allowed right now so Mev
boost a lot of the block production
pipeline in uh ethereum is very agentic
get the me out then figure out how to
democratize and distribute
it all right so I think the Shar
sequencing marketplaces also like
espresso take a very agentic approach um
let's Outsource this to a market of
complex agents and um yeah hope and
sequence that way all right on the other
end of the spectrum
um automated block building there's
ordering rules that are enforced by a
combination of consensus cryptography
usted Hardware so for example chain
links Fair sequencing service is the
first come first serve service is kind
of dictating The Ordering of
transactions most L2 sequencers are this
way suav Prof are uh use cryptography to
encrypt them M Pool and then um enforce
a specific ordering these are fairly
automated there isn't that much room for
um block production um markets there
isn't that much
Freedom okay I've put fossil and braid
in the middle I think these are somewhat
restrictive of what the block producer
can do so in fossil there is a committee
that enforces a template on some
fraction of the block and what it can
include in braid the power of any
specific proposer is limited um so both
of these are they they're still a market
agents Al together can uh affect the
outcome or like the block that is
produced but they can't produce any
block they
want cool so how do we choose the right
place on the Spectrum for our specific
app and to do that we need to Define
benchmarks uh so what do we care
about these are some properties that
people like in fee markets none of them
is new low latency is pretty obvious you
want fast turnaround times uh
tractability uh this is maybe less often
cited as a property that we need but if
we have an automated
um rule if it's requires solving very
complex MP hard problems we can't run
that on chain so it is crucial that um
the auction itself is computationally
tractable to
run simple ux is capturing a bunch of
things
but roughly speaking we don't want users
to have to do very complex
strategizes two points that are
addressing efficiency one of them is
Surplus maximization and if you remember
the first slide was supply and demand um
there is gains from trade the PO
possibility of generating Surplus by
matching supply and demand effectively
and ideally we want to create the most
Surplus possible and simultaneously to
be efficient we don't want extraction so
users are the people whose uh utility
and Welfare we care about agents are not
so we don't want all of the Surplus to
go to agents and if we're not careful
with Market design the Surplus will go
to
agents and I guess let me highlight the
fact that the these two are they
interact in a subtle way they're kind of
a dual objective both trying to Target
welfare and the tension between them is
at the core of when you use a gentic
versus automated block building and the
reason is that sometimes one end of the
spectrum is really good at maximizing
Surplus but at the same time it will be
extractive so you have to figure out how
to trade these two off based on your
application so I have some time left I
will go through two specific di based
examples and use them to highlight the
trade-offs between between the two ends
of the spectrum the first one is front
Runing if you're not familiar I'll
quickly explain what it means um there's
a user wanting to buy eth on uni this is
the current eth price is 3200 USD
usdc and um the User submitted this
transaction to a public men poool an
agent sees that transaction and puts a
sandwiches it with a Buy on the left and
the sell on the right and the effect of
that is that the first agent transaction
drives off the price of e on uni then
the user transaction happens at a worse
price and then immediately the agent can
turn around sell the same amount of
eth basically make $300 a profit at the
cost of $300 lost to the user this is a
perfect example of purely extractive me
it's a zero sum game between the user
and the agent this is the kind of M we
want to get rid of of avoid as much as
possible okay so should be pretty clear
that agents will extract this MV so
agentic block building will be bad at
this um whereas automated will be pretty
good at this the design principle of
profer suave and these Inc M Pools where
exactly to mitigate this maybe if we
hide the direction and size of the order
we will like leak less information and
there is less front running and
sandwiching happening okay so the second
example is uh Arbitrage between a
centralized exchange and a decentralized
exchange again I'll kind of Define it
quickly um basically you have um you can
have an asset pair again e or and usdc
or USD trading on two different
exchanges in this case binance a
centralized exchange and Unis Swap and
so block times are discret uh
centralized exchanges are not they
operate continuously with wall clock
time so here the orange line is the
price on binance and the red line is the
price on uni basically the price was as
of the previous block 3200 nothing is
happen since because this is the
deadline for the next block and there
can be a discrepancy a gap between the
prices on the two
exchanges so what an agent can do is for
example at this point in this slot
observe that oh the price is lower on
uni higher on binance I can inject a
transaction on chain to buy e and sell
on binance and collect a profit very
simple and I guess first of all why is
this good I'm arguing there is
possibility for generating Surplus this
arbitragers are providing a service and
guess the reason is the same reason
markets being efficient is good right
you want the markets can be viewed as an
a an a venue for aggregating information
and you want prices to be uh reflecting
the true value of um assets and so for
the health of the market it's good that
the price on uni is reflecting the price
on binance and they're all reflecting
the overall Market sentiment and
everyone's
information but um at the same time
there is a possibility for extraction so
this person is making money where does
the money come from you can't print it
uh there are liquidity providers on
unisoft and
this is coming kind of at the at a cost
to them I won't be able to like fully
Define this but this is what lever loss
versus rebalancing refers to and I chose
this example because it shows the
tradeoff between the two welfare
objectives um you yeah like you can't
simultaneously satisfy both of them at
once and yeah there's a tension between
them okay and maybe one other
observation here is that to successfully
run this trade it's important that this
agent knows that they will be the block
producer so remember in this step the
selling on binance I can do at any time
the buying on E in the middle of the
slot I'm not sure necessarily that I
will be able to do this side of the
trade and if I can't do it if I'm
uncertain about that uh there are a lot
of costs I will pay in fact like my this
trade is negative EV it's bad for me so
the more uncertainty arbitragers have
about their ability to do both legs of
the trade the less willing they are to
do it they will require higher margins
larger AR
bounds then the price between uni and
binance will deviate more and more that
is less uh accurate pricing that's less
Surplus and that's
bad okay so this observation um um I
want to highlight and ask you to
remember because it will be relevant to
the next slide um I am short on time so
let me maybe pick a specific point to
make
um okay so let me focus on this point um
so the claim here is that automated
block building will not be able to get
Surplus Max ization and be
computationally tractable and here let's
consider a specific way of automating
block building based on priority
ordering there's this nice post about
why this is a pretty good idea um so the
way this works is every transaction
comes with a single bid you order
transactions in decreasing order of bids
and that that's all it is and the hope
is that this will be efficient but as
this post also points out this scheme is
vulnerable to reversions the issue is
that if coordination has to happen
through the men poool instead of by
delegating fully to an agent who has
full control and knows for certain that
they will be in charge of this block and
they can for sure do all legs of the
trade there is some risk that these
people don't know for sure whether their
trades will go through uh there is some
loss efficiency loss because of that I
think I'm about out of time so let me
skip to the
conclusion I've introduced agentic ISM
outline the spectrum between agentic and
automated block building roughly
speaking automated block building is
good with respect to latency there isn't
there aren't a lot of parties that have
to communicate uh and also generally
it's there's less
extraction but they might not be optimal
they might not uh generate the most
economic value so what's an application
where we should opt for automation for
if you want naon chain you want low laty
you don't want front running you should
be more and more automated agents on the
other hand are very good for maximizing
Surplus especially when the user
preferences are complex but they will be
selfishly trying to extract as much of
the Surplus as they can and one example
of where agism is good is um ritual uh
ver rual resonance is a Marketplace we
designed for AI computation the setting
is nodes and AI queries all have very
complex preferences and there's a
because this allocation problem is very
hard uh because it's a large complex
matching problem so there's a lot of
potential for generating Surplus and
there isn't that much toxicity or defi
activity going on so perfect example for
being very agentic and that's the end of
the spectrum that we were on and defit
is coming out today so check it out all
right thank you for
listening my
me um thanks a lot for that talk super
detailed and um and and gets into like
nuances and also like the examples were
good you can scan the QR code for your
questions and let's quickly get to them
talking about cir plus maximization and
decreasing extraction how do we draw the
line between a user and an agent what
determines whether we think of an
extracting entity as a user or agent
that's a very very good question it's
exactly the trade-off I was trying to
highlight um I think it's an art not a
science um for example in the P
Arbitrage example if we want to think of
the liquidity providers as users as
welfare we care about uh it's a
different story than if we just care
about the Traders and how accurate the
price is for them so I think what
happens is for a specific application
you um try to de side just draw a
boundary that uh includes the people who
whose welfare and utility you care about
the most and yeah so you draw the line
based on uh the purpose of your
application right um the other question
will Jared from Subway be out of a job
with automated block building um no
comments uh uh can you talk about the
resources the ritual is selling and what
preferences the users might Express over
there yeah so uh ritual is selling uh AI
inference
um basically but it could be different
AI models and there are nodes that are
very heterogeneous so they have
different resources CPU GPU uh bandwidth
um it's very high-dimensional so much so
that it didn't make sense to design a
specific multi-dimensional fee Market
it's just too many dimensions um and
users have
uh infer his queries and ritual is
providing this or this Marketplace to
Mash queries to nodes uh and the
preferences can be as complicated as a
user might have privacy concerns so it
might want uh an MPC containing a set of
nodes to run its inference u a user
might have uh latency concerns where I'm
patient I'm willing to wait a while or
not and all of these preferences should
be able to be handled um why is it bad
for automated strategies to give up on
Surplus maximization in the front
running example the Surplus plus capture
appeared to be bad for user welfare yes
I would argue in the front Runing
example there was no Surplus generated
it was a zero sum game um it was
basically a transfer from the user to uh
the agent so in many extractive Zero Sum
examples uh is just not good to have
agents but uh a good example of a GU
Surplus is maybe in the case of ritual I
described these very heterogeneous um
nodes and users and if you write any
piece of code to try to match these
together the problem of optimally
matching them is just empty hard hard to
approximate as well so doing that on
chain will lose out on the efficiency
you could get by having a more
sophisticated agent find a better
allocation I hope that answer the
question uh seems a very L1 problem do
L2 solve this by running a s calized
sequence I think it's um not just an L1
problem I guess like if an L2 runs a
centralized sequencer that is committing
to a first come first serve ordering
they are choosing a very automated
approach they are potentially missing
out on uh complementarities between
transactions or
like so yeah I think it applies to other
layers too and the last question what
sort of support or major changes do you
expect from the chain or the foundation
um I don't know that this applies to me
is it ethereum chain or
Foundation um yeah I don't understand