Explore the MEVs of Ethereum, Solana and Cosmos ecosystems

Overview of Market Structure in the Block Space: Exploring the MEV Landscape of Ethereum, Solana, and Cosmos Ecology

Original article by Natalie Mullins

Deep Tide TechFlow

So far, the MEV conversation has focused almost exclusively on Ethereum. However, this article explores MEVs in the Solana and Cosmos ecosystems. This paper will highlight various approaches to addressing the challenges of MEVs and associated incentive adjustment, including a comparative analysis of trade-offs. By broadening the scope, we can learn from the various practices in operation to better anticipate potential problems and ultimately design better solutions.

ETH

On Ethereum, the rise of financial applications became a catalyst for broader research and understanding around MEVs. The groundbreaking Flashboys 2.0 paper, published in 2019, not only coined the phrase "MEV", but also clarified how the phenomenon could be manifested on the chain. This was the first time most of us were exposed to concepts such as priority Gas auctions (PGAs) or searchers. Shortly thereafter, Flashbots was formed to address the many incentive tuning challenges associated with MEVs. They initially came up with three core goals to try to achieve:

Light up the dark forest

Democratization of value extraction

Distributive benefit

Since then, both of their major product launches have achieved over 90% network adoption, and it's fair to say that these goals have also evolved into guiding principles that have largely influenced the development of the Ethereum block space market.

The core product of Flashbots

Flashbots Auctions (mev-geth + mev-relay) create a private trading pool and off-chain sealed bidding auctions. This allows searchers to express a more refined preference for tx ordering in the form of bundles, as well as bids included at the top of the block, without clogging Ethereum's public mempool and making Gas charges rise severely as arbitrage attempts fail.

Flashbots Protect  Is an RPC endpoint that can be added to a consumer wallet, such as MetaMask. This extends the benefits of the product to the average user.

MEV-Boost  Is designed for the Ethereum Merge, as MEVs are expected to become an increasingly centralized force in proof of interest. It is the first implementation of the proposer-builder separation (PBS), which aims to bring blocks together by creating a more decentralized, competitive block building market. Builder  Is separate from the role of the block proposer.

MEV-Share (unreleased) Outlines the design of a protocol that matches transactions from users, wallets, and/or applications with searchers in a private and permissionless manner. Decentralized access to order flows and the introduction of the concept of programmable privacy are key long-term goals of the protocol.

SUAVE (unreleased) is an upcoming release that aims to solve (  1) Exclusive order flow and (  2) Residual centralized weights of cross-domain MEVs. Details of this project are scarce, but it appears that SUAVE will act as a decentralized memory pool and sorting layer for the EVM ecosystem. It will employ encrypted memory pools and introduce new players into the MEV supply chain: executors -- who will compete to provide the best execution for users.

Solana

Like Ethereum, Solana  An increase in financial activity. MEV  Activities that begin to degrade the end-user experience. However, unlike Ethereum, where Gas became very expensive, Solana's problems were caused by a combination of:

(1 ) Very low Gas bills.

(2 ) Lack of cost market.

(3 ) The lack of a suboptimal transaction propagation protocol does not offer many options for preventing web spam.

During wild market movements or popular on-chain events such as NFT Mint, the volume of spam sent to the network is sometimes so large that it causes network outages.

Some may wonder why the Flashbots product suite can't simply be repurposed for Solana. However, it is important to consider that Solana's architectural design is very different from Ethereum's architectural design and therefore requires a unique approach. Key differences include, for example, Solana's speed (400 milliseconds between blocks), unique data propagation protocols, memory poolless transaction forwarding, primitive toll markets, and parallel transaction processing.

In 2022, Jito Labs stepped in with a specific   Solana  The ecosystem approach provides much-needed MEV infrastructure. Like Flashbots, they started with several key goals in mind:

Minimize negative external factors of MEV

Prevent centralization

Distribute the rewards of MEV

Core product of Jito Labs

Since then, Jito has been the dominant MEV solution provider on Solana and has released a number of products, including:

Jito-Solana is the first third-party Solana client optimized for efficient MEV extraction. Much like the mev-geth, it supports transaction collection and works seamlessly with Jito Relayer and the Jito Block Engine.

Relayer is designed to provide verifiers with a layer of protection between their TPU (transaction processing unit) and network spam. Validators can run their own Relayer or use a version hosted by Jito Labs.

Block Engine is essentially a high-performance block builder -- it conducts sealed bid auctions of block space and forwards a collection of the most profitable trades to the current leader for immediate execution. The Block Engine is also globally distributed to provide open access with low latency.

Searcher Tools:

Jito Mempool - Although Solana does not have a mempool in the traditional sense, it allows searchers to subscribe to "accounts of interest" and use bundling to automatically extract MEVs from their transactions, allowing for a more proactive search approach.

ShredStream - running on the Jito-Solana client, it sends the shards directly to the locally connected block engine and allows the searcher to access the shards forwarded by the leader, reducing latency by hundreds of milliseconds. A fragment is a fragment of a block (the smallest unit) that is continually emitted as the validator generates blocks. They are assigned to the network according to a shuffling of pledge weights, so servers with higher weights may receive fragments more quickly, which can give a meaningful advantage when engaged in high-frequency trading).

MEV payments and distributions enable verifiers to seamlessly distribute MEV awards to their pledge positions in the form of airdrops.

Chorus One, one of the largest node operators in any major cryptocurrency ecosystem, also recently released a white paper outlining a prototype for Solana-MEV. This is a modified client designed to further decentralize the extraction of validators without adding unnecessary delays to the system. The client will make it easy for verifiers to examine potential MEV opportunities after each batch of user transactions and insert their own transactions to capture value.

Cosmos

Although Cosmos arguably has the most rudimentary DeFi ecosystem, it promises to be a fertile ground for block space market design and cross-domain MEV trials.

Unlike Ethereum, which already has billions of dollars in transactions and loans, and Solana, which is dominated by low-latency financial applications, Cosmos appears to be moving slowly with MeVs.

There are many possible reasons for this, but the most obvious explanation is this. The Tendermint client uses first-in, first-out (FIFO) sorting by default, as well as a lack of financial activity.

It was not until the release of Osmosis in late 2021, and even the collapse of Terra in May 2022, that anyone began to notice and measure the meaningful amount of MEV captured in the Cosmos ecosystem. Combine these events with bear market conditions such as plummeting fees, and it is easy to see why the verifiers begin to consider other options in an attempt to maintain profitability.

As a result, some Cosmos native MEV solution vendors are starting to enter this space, most notably Skip Protocol and Mekatek.

Mekatek's core product

Zenith aims to create an open market for block building in Cosmos. Searchers can submit transaction packages and compete for priority within blocks, while validators can outsource block construction to Zenith and sell their block space for maximum profit.

The core product of Skip Protocol

Mev-Tendermint is a modified version of Tendermint that allows verifiers to accept deal bundles and introduces sealed bid auctions in order to be listed at the top of the block (Skip does not build the entire block, only the top).

Skip-Select brings Cosmos sovereignty to MEVs by allowing fully configurable, governance-driven auctions of block space. It makes it easy for the verifier to decide how to allocate MEV rewards, what percentage of a given block's build should be outsourced to Skip, whether to protect the block from preemption/sandwich, and so on. Skip-Select also sets the stage for future voting and enforcement of in-protocol MEV preferences via on-chain governance, enabled by Cosmos SDK and AB ++ (application block link interface).

Skip Secure is very similar to Flashbots Protect -- private transaction RPCS that end users and front ends can leverage for private execution.

Proto-Rev is arguably Skip's most exciting product -- a custom module for incorporating certain MEV preferences into the core protocol. The first implementation of Proto-rev was to help Osmosis internally capture some meaningful arbitrage-based MEV awards, but the service will be provided on a per chain basis.

While less information is publicly available about the project, FairBlock is building iBE-based solutions (identity-based encryption) to address MeV-related challenges. The team plans to use Cosmos Hub's Interchain Security for their consumer chain, which will be used to manage and distribute validator decryption keys.

Key point

The success of PBS -- the concept of Block Builder Separation (PBS) has spread beyond the Ethereum ecosystem, with versions of it now existing in the Cosmos and Solana ecosystems;

Battle of Latency - Due to Solana network architecture issues, Jito Labs takes a delay-sensitive approach to MEV extraction, which gives an advantage to users running servers or validators outside of the US or Europe;

Enshrined Solutions - Because of the level of sovereignty and autonomy the Cosmos community has over its technology stack, it is generally easier to embed MEV solutions such as PBS into the core protocol. There are a number of reasons for this, including the fact that while Cosmos governance is often challenging, it can be done on a chain without regard to how changes will affect other applications. On the technical side, innovations such as the latest version of AB ++ allow for new possibilities in how Cosmos based applications communicate directly with the consensus layer, such as enabling capabilities such as threshold encryption;

Cross-domain MEVs - As Flashbots explains in the SUAVE manual, the incentives to acquire cross-domain MEVs will increase in the next few years and may pose a validation threat to various ecosystem economic security models. Because Cosmos is built for cross-chain use and may be exposed to the centralizing forces of cross-domain MEVs, there are already large entities running validators on multiple Cosmos chains, which, if left unchecked, will result in a world where only a few and extremely well-capitalized validators control meaningful shares of the pledge on various chains.

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