[Music]
hi I will have to speedrun this talk so
if you want a more relaxed version of it
you can scan the QR code or go to Tiny
url.com
stepcon uh where I gave this talk in a
25 minute
version let's start with the problem
that I have with proposer Builder
separation why I think it's not a good
idea there are three main arguments in
my point of view first the trust and
centralization um problems that it
brings onto the E theorum base layer for
all types of transactions not even the
ones that actually contain me ethereum
today is proud to have more than 1
million validators um proposing and
validating the chain and you know we are
one of the most decentralized chains or
the most decentralized chains in the
world but at the end of the day if you
look at it there's only two very
well-known entities beaver and Titan
that propose more than 90% of the block
contents and how valuable is it really
to have a vast validator Network when
the most important part the content of
the block is decided by two entities
moreover PBS adds this trusted component
to the supply chain the Mev relay that
Builders have to put their faith in and
even if we trust the research that's
ongoing that's trying to propose ways to
enshrine the Mev relay into the base
layer and get rid of that trusted
component I think there is a couple of
issues with that first it adds
complexity to the core protocol one
thing thing that we're trying to avoid
and second of all it's not even clear
that if implemented it will find
adoption because me is a very latency
intense game and any decentralized
peer-to-peer gossip based solution is
always going to have latency
disadvantages and also feature disparity
um Builders today want to have bid
cancellation as an example they want to
make a bid and then cancel it if they if
they change their mind and such a
feature is simply not possible in an
enshrined PBS version because once you
gossip the message you cannot take it
back and let's not forget that PBS
actually maximizes the harm that is
inflicted on users in order to win the
PBS auction you have to create the block
that is extracting the most values value
via sandwiching or other types of me
attack and thus we've created a system
that really favors the worst possible
outcome for the user okay enough of a
rant what do we do about it first let's
maybe St take a step back and try to
find out why does me exist in the first
place and here really the fundamental
reason is that in today's system every
token trades at many different prices
within the same block here I brought you
an example block from a couple of days
ago in which ethusd trades at least
seven different times with seven
different prices and so you'll see sexex
arbitragers that are able to access for
instance the Unis swap pool at the
previous Block's outdated price and then
the rest of the block will trade at the
new kind of fair equilibrium price you
will see Liquidators that are able to
get um bad collateral at a fixed
liquidation penalty 15 20% below low
fair market Price and the rest of the
block trading at a different price and
last but not least you have sandwiches
that front runner user to buy a token at
Price a the user then prize it at Price
B and the
sandwichera C all of these strategies
have one thing in common the same asset
trades in the same block at different
prices and the reason for this is that
we basically took our well very well
best known standard first come first
served mechanisms that work in
traditional continuous time markets and
deployed on blockchain and this was the
key mistake ethereum doesn't have
continuous time there's only new
information being released every 12
seconds and then it's released in one go
and The Ordering of the information
within the block is up to a unilateral
party the proposer to decide how to
order things there and so it's unsafe to
deploy any kind of mechanism that works
on continuous time on a discret time
blockchain so what what's next what what
how can we do to fix this well as you
might guess we need to come to a point
where trading the same asset in the same
block should lead to the same execution
regardless of trade ordering or put
differently we need to get to one price
per token per block this design requires
to be able to batch trades together so
it doesn't work on Raw ethereum
transactions instead we need trade
intents or just signed limit orders and
batch those together in a
multi-dimensional auction which can
later be cleared at a single price for
details on how this looks I encourage
you to look look at cow protocol the
trading mechanism that powers cow swap
which pioneered and implements this
mechanism it's processing many billions
of dollars in transaction volume every
month and is basically proof that this
mechanism can work on
chain cow protocol provides meev
protection for all the cases that I
mentioned on two slides ago um we
protect swappers by having buyers and
sellers um that trade the same asset
receive the same price regardless of
their ordering and we can even match
them together in what is known as
Coincidence of Once by making amm part
of the batch and treating them like
swappers LPS no longer trade at outdated
prices but instead get the fair new
equilibrium clearing price and
liquidations are just stop loss orders
which you can also add to the total um
liquidity pool and make sure that
collateral recovery happens at the most
efficient and fair price I want to leave
you with this number which is a dune
query that you can check for yourself
that shows that more than 97% of me
today is trading related and that is
sandwiches sex sex Arbitrage back
running liquidations and those can be
vastly reduced if not completely
eliminated at the application layer by
not using pseudo continuous time
mechanisms so I'd like you to join me on
my mission to convince this space that
we should fix the mechanism rather than
making the chain more complex and with
that thank you very
[Applause]
much thanks for that great talk um if
any of if you have questions you need to
scan the QR code and uh ask the
questions
remotely uh I'm going to read out the
question for those joining virtually do
you have an estimation of reduction in
me if only Dex used is cow yeah so right
now cow SW focuses on on Swap me
protection um I didn't break the number
97% into swap amm resistance and
liquidations um so right now it would
probably be you know less than 97% but
the mechanism itself not the product as
it exists today but the mechanism itself
would be able to reduce meev by that
number that I that I
showed um the second the other question
is do you think PBS causes
centralization or is it correlation I
think PBS uh causes centralization um
mainly because it's a winner takes all
latency game um I wouldn't say it's
correlation there's also a reason I
couldn't get to that slide because I
didn't have enough time for why I think
cow protocol or an application specific
um auction is not going to cause the
same centralization or even if it would
not affect kind of all types of
transaction so if I want to make a
transfer I'm not kind of subject to the
censoring that happens today in the in
the Builder Market um but yeah for this
I would refer to the longer talk yeah um
How would do you compare cow with what
sella is doing to fix meev on the
application layer via Unis swap hooks
yeah I would I mean cow is working and
out there and live um I think the
mechanism is relatively similar um and
uh yeah I think that's the the just you
can deal with the last question how does
cow deal with multiblock me um it it
doesn't uh because basically the batch
itself has its own um has its own kind
of heartbeat its own time and so if you
were to try to do multi batch m I think
you're running the risk that the whoever
solver will win the batch is going to um
execute the trade before you so so
there's no real incentive for you to to
to censor or try to delay execution to
another
batch thank you so much thank you very
much
[Applause]