Content Directory:

· Layoffs are Blocknative's bear market self-rescue measures

· Relayers provide expensive services for free, Blocknative withdraws from this "pseudo-decentralized" game

On October 10th, according to CoinDesk, Matt Cutler, CEO of Ethereum infrastructure service provider Blocknative, stated that Blocknative recently underwent a restructuring, with over 33% of its workforce being laid off. Blocknative, founded in 2018, now has a total of 24 employees, meaning that approximately a dozen employees were affected.

Related reading: "Blocknative Reduces Headcount by Third, After Suspending Work on Relay Project".

"Committed to extending our development path so that we have ample opportunity to pursue real-time observability issues," Cutler said in an email to CoinDesk.

Those who can have the last laugh in the market, capital is a key factor.

Layoffs are Blocknative's bear market self-rescue measures

Blocknative raised $5 million in November 2020, followed by a $12 million funding round in July 2021. In December 2022, it announced the completion of a $15 million A-1 round of funding. Leading and participating investors include well-known funds such as Blockchain Capital and Coinbase Ventures, indicating that Blocknative has received sufficient market attention and funding support.

However, from the current results, layoffs have become a bear market self-rescue measure for this veteran project.

The announcement of layoffs during a bear market is not surprising. For Blocknative, this news of layoffs seems to be a continuation of its last market attention-grabbing event.

Relay provides expensive services for free, Blocknative withdraws from this "pseudo-decentralized" game

On September 28th, Blocknative announced that it will discontinue its MEV-boost relay service due to its inability to maintain profitability. However, Blocknative will continue to provide other core services, including memory pool browsers, transaction simulations, Ethereum gas estimators, and Polygon estimators, as listed on its official website.

The protocol expert rplust stated that relaying is a thankless job. Blocknative CEO Matt Cutler said in a previous interview, "Atta boys, high-fives, and nice tweets don't pay the bills."

Related reading: "Another major MEV relay service shuts down, over 90% of Ethereum block settlement will be controlled by 4 companies in the future"

"Data analyst Data Always pointed out in a tweet that relay services have no rewards, and only the top-ranked block builders can truly make money. This is an extremely "cruel" market structure. bloXroute founder and CEO Uri responded in a tweet that Ethereum's current relay market lacks a reasonable incentive mechanism for fees, and proposals to improve relay fees have always been "pending."

Last week, Matt Cutler stated in an interview with Blockworks that relayers are responsible for bridging transactions between block builders and proposers. Without relayers, the network would face delays in transaction confirmations, reduced efficiency, and potential bottlenecks, which would disrupt the smooth processing of transactions. This not only raises issues of centralization, but also highlights one of the main obstacles to the Ethereum merge: relayers providing expensive services for free. Matt stated that "just maintaining operations, we may not even be able to pay engineers' salaries, which does not meet our needs."

However, due to Blocknative being a US-based entity, OFAC compliance standards restrict Blocknative from choosing community donations as a way to reward relayers while maintaining a free financing model. Matt stated that "each violation of OFAC SDN can result in fines of up to $30 million and a maximum of 30 years in prison. Each transaction can be considered a violation, which is like an infinite responsibility. We are in a dilemma and cannot satisfy both at the same time."

"This further makes Blocknative's survival situation difficult."

Related reading: "Matt Cutler: Ethereum is "much more centralized than people realize"".

"There are no clear economic incentives, so there are opaque implicit economic incentives. Various economic incentives encourage people to engage in behaviors such as co-location, and there may be various behind-the-scenes transactions, which may have already occurred. The degree of centralization of the network is much higher than people realize and is moving in a more centralized direction. It is moving in the wrong direction. Hey, Blocknative is out, and we can decide whether this is a good thing or a bad thing, or whether it is an unsurprising event, but there is no doubt that the degree of centralization of the network this week is higher than last week."

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