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Primer: Introduction to Block Proposal and MEV-boost Processing

2022-11-23 18:32

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Original title: "Fundamentals: Block Proposing and MEV-Boost"

Original author: SalomonCrypto, encryption researcher

Original compilation: Haym, ETH Chinese

Two foundations of Ethereum: block proposal and MEV-Boost

What is a block proposer? What is MEV-Boost and why is it so important to Ethereum today? Why do we need long-term solutions, and what do they look like?

Ethereum is a distributed computing platform, which is a network composed of thousands of computers (nodes). It coordinates using a PoS consensus mechanism to maintain synchronization of the Ethereum Virtual Machine (EVM). EVM is a shared computing platform, while blockchain is its history, and ETH is its source of life.

PoS is a big topic, what you need to know is:

· A block is a bundle of transactions executed in the EVM

· Users will send pending transactions to the transaction pool

· in each slot , the network will randomly select a validator to become the block proposer

Read more to see< a href="https://twitter.com/SalomonCrypto/status/1579594609855934465" target="_blank">here.

How PoS works at the protocol layer is simple: proposers build their own blocks. The vast majority of proposers just need to select transactions down the list of pending transactions until their block is filled with transactions. …but some proposers make better decisions and thus earn higher profits.

MEV stands for Maximum Extractable Value, which represents the monetary value that can be extracted from having special information, access rights, or privileges in a system general principles. (Translator's Note: MEV, also known as miner extractable value, has been widely used after the merger to refer to validators packaging transactions or sorting transaction platforms to receive a lot of value.) On Ethereum, block builders control the vast majority The MEV.

As a simple example, suppose Alice wants to sell 100,000 ETH and Bob wants to buy 1 ETH. Alice's order is so huge that it can even affect the price of ETH. If the builder puts Bob's order before Alice's, then Bob will buy less ETH than if he puts it after Alice's order.

Sophisticated block builders can do a lot of things with sorting to their advantage:

· Get a higher tip from Bob to Execute his transaction first

· Create and process a transaction to sell your own ETH before processing Alice's transaction

· Create and process a transaction to buy back more ETH when the price of ETH is lower

For validators, being good at building blocks is profitable and highly incentivized. The more they can understand how transaction pools work (and the better at accessing private order flow), the more value they can earn from their stake. But therein lies the problem: if left unchecked, MEV will centralize Ethereum.

The problem is that the effects get worse over time. This is also the essence of compound interest - the eighth wonder of the world.

People will pay the price".)

If left unchecked, the most capable block builders will capture more and more ETH, eventually even It is Ethereum.

In order to further explore the importance of decentralization, readers can first read the The second article, now let’s take a brief look at it.

It can be said that credible neutrality comes from decentralization, and the value of ETH is From trusted neutrality.

Fortunately, back in 2020 @thegostep and Flashbots foresaw this kind of problem and set about building it. Even before the merged upgrade was complete and Ethereum switched to PoS, they already had a temporary solution running (and readying a full solution).

Note: Briefly explain how the Ethereum node works. A node is a computer that runs two software, the execution layer client (manages EVM) and the consensus layer client (manages PoS).

MEV-Boost is additional node software that enables nodes to Get blocks. It can build blocks automatically all the time, or it can look at block headers and get blocks from professional block builders. …builders also pay a fee to be packaged first.

Think about the above example, assuming that the block builder knows that Alice is going to affect the market, he can calculate the price difference between selling and buying back ETH before and after the transaction, so that he can Lock up an additional 50 ETH. In order to be packaged first, the builder may be willing to bid up to 49 ETH, because he can still lock in a profit.

The purpose of the MEV-Boost system is to combine the difficulty of building blocks, knowledge/capital/experience and The economic rewards for proposing blocks are separated. When a proposer is selected to propose a block in a slot, he can share the rewards provided by MEV simply by selecting the block with the highest bid.

MEV-Boost is an excellent product, it is a step on the road to decentralized Ethereum A big step forward, but it's not perfect. In order for the reader to understand why, we need to delve a little deeper into how MEV-Boost works (but not too deeply).

First of all, we must know three characters:

· Builder, responsible for making the most profitable block for each Slot

· relay, responsible as an intermediary

· The proposer is the Ethereum validator responsible for proposing blocks

The problem with MEV-Boost is that it relays, not only the builder Relays need to be trusted, as do proposers. Builders must trust the relay to keep their blocks invisible until the proposer pays the builder's fee. The proposer must trust that the relay has confirmed the validity of the block and bid without being allowed to see the underlying transaction. This is very important because invalid blocks will result in the proposer being slashed.

Fortunately, we have solutions, two of which are discussed below. But before I do that, I want to take a moment for readers to realize that while MEV-Boost is not perfect, it is a giant leap forward. With MEV-Boost, node runners using plug-and-play devices (like myself using @Rocket_Pool) are already experiencing MEV benefits.

The first solution is to write the concept of MEV-Boost into the Ethereum core protocol . This would eliminate the need for relays in the network and allow us to verify everything cryptographically without leaking block information early on. We call this idea the Enshrined Proposer-Builder Separation written into the protocol.

The second method is to use @sreeramkannan's new ideas about Ethereum features, The trusted components of MEV-Boost are transformed into a trustless system powered by Ethereum. Here you can also refer to here.

Both of these solutions require some modifications to the MEV-Boost schema. On top of that, MEV-Boost may enable block builders to censor blocks (for whatever reason). Fortunately, there are plenty of other great ideas that can serve as solutions.

But don't think too far ahead, we've only just gone through the merger. There is still a lot to build before we move on from MEV-Boost.