In this article, we will delve into the MEV landscape of the BNB chain ecosystem.

Abstract

• Introduction to MEV

• Implementation of PBS on BSC

• Transparent and fair block market on BSC

• Providing MEV protection through BSC block builder

Introduction

MEV is a concept that has become central to the blockchain industry, especially in the context of decentralized finance (DeFi). MEV refers to the profit that miners, validators, and other participants can extract from the ordering, reviewing, or inserting of transactions within a block. Participants in MEV include users, wallets, searchers, builders, and miners, each with different roles and incentives. In this article, we will delve into the MEV landscape of the BNB chain ecosystem.

Background and Progress

The industry has made significant progress in MEV, developing various solutions to mitigate its negative impact and improve efficiency. Since the beginning of 2023, the BNB Smart Chain community has done a lot of work in the MEV field and has ultimately embarked on the path to provide MEV solutions to all validators.

The Ethereum ecosystem has been at the forefront of addressing MEV challenges and has implemented various innovative solutions to mitigate its impact. The following are some highlights of current technical solutions in the Ethereum ecosystem:

• Flashbots: Flashbots is a research organization that has created a transparent market for MEV extraction. It allows searchers to directly send transaction bundles to miners, reducing harmful effects such as gas price auctions and achieving more efficient value extraction.

• Archer Swap: This is a trading platform that helps users avoid front-running transactions by sending transactions directly to miners instead of the public mempool. It provides users with better trade execution and protection against MEV-related risks.

• MEV-Boost: After the transition to proof of stake in Ethereum, MEV-Boost is a middleware for inserting architecture that allows validators to maximize Ethereum's censorship resistance by locally building low-MEV blocks while still outsourcing high-MEV builds.

• SUAVE: Flashbots' SUAVE project aims to decentralize the block building process. It serves as a plug-and-play mempool and decentralized block builder for any blockchain (including Ethereum), enhancing network resilience.

• COW Swap: A decentralized trading protocol that provides MEV protection by routing trades using private liquidity sources and minimizing the risk of front-running bots.

• Gas Token Utilization: Some searchers in Ethereum use gas tokens to pay transaction fees, optimizing gas savings and allowing them to bid higher during auctions.

• Decentralized builder concepts: Research on distributed builders and crLists (containing lists) aims to limit the centralization of block builders, ensuring a more decentralized and resilient network.

• MEV-capturing AMM: Exploring new automated market maker (AMM) designs that transfer transaction ordering rights to AMM designers and liquidity providers, allowing them to capture a portion of MEV currently harvested by block builders and proposers.

• Order flow auctions: This mechanism allows any searcher or builder to bid on user order flows, creating a more competitive and transparent market for MEV extraction.

• Tornado Cash: A privacy solution that also mitigates some MEV risks by breaking on-chain links between source and destination addresses.

These solutions represent the collective efforts of the EVM community to address the complex challenges posed by MEV. The ongoing research and development in this field indicate the industry's maturity and active efforts to address the most pressing issues.

Current on-chain analysis and implementation

As of the latest data, approximately 22 validators have integrated with MEV providers, with 29 validators actually active. This represents a significant portion of active validators and underscores the growing importance of MEV in the blockchain ecosystem, with BloxRoute becoming a relay in the BSC validator community.

Growth Trends

The strong growth in integration in the previous quarter indicates increasing interest in MEV optimization among BSC validators. Considering that by the end of 2022, only 6 validators had integrated with MEV providers, this trend is particularly noteworthy. The rapid growth of integrations reflects the perceived value and potential of MEV, indicating that this field will continue to be a focus of innovation and investment in the coming months and years.

Many validators report improved profitability and efficiency. The integration of MEV providers enables validators and delegators to leverage new sources of income and optimize their operations. This success has driven the increasing interest in MEV within the BSC ecosystem.

On the other hand, some validators face difficulties in integration, competitiveness, and transparency. The complexity of integrating MEV providers with existing systems may pose technical challenges. Additionally, concerns about the transparency and competitiveness of MEV extraction have raised questions about the long-term sustainability and public perception of these practices.

These successes and challenges paint a detailed picture of the current state of on-chain MEV analysis and implementation. They underscore the need for ongoing research, development, and dialogue to ensure that MEV continues to develop in a balanced manner, balancing profitability, responsibility, and transparency. The current situation highlights the necessity of increasing competitiveness and introducing more relays to ensure innovation, improved efficiency, and a more balanced and robust MEV ecosystem for BSC.

Challenges and Opportunities

MEV presents challenges and opportunities for the blockchain industry. While it raises complex issues related to fairness, centralization, and ethics, it also offers the potential to improve efficiency, profitability, and innovation. Attracting more relays requires a multifaceted approach, emphasizing transparency, incentives, ease of integration, community involvement, and regulatory compliance.

Challenges in MEV Implementation

• Fairness of transaction prioritization: Ensuring fair transaction processing that is not subject to manipulation by miners or validators is a significant challenge. The ability to reorder or exclude transactions could lead to front-running and other exploitative behaviors.

• Complexity of implementation: Creating a system that can effectively capture MEV while maintaining network integrity and performance is extremely complex. It requires careful consideration of various factors, including transaction fees, gas prices, and network congestion.

• Centralization risk: MEV can incentivize centralization, with a few powerful entities controlling the majority of hashing power. This could undermine the decentralized nature of blockchain and create vulnerabilities.

• Ethical considerations: MEV extraction raises ethical questions about the fairness and transparency of blockchain. It could create an unfair competitive environment, giving certain participants an advantage over others.

New Implementation Opportunities

• Improved efficiency: If implemented properly, MEV can bring about more efficient block production and transaction processing. By optimizing transactions, miners can maximize profits while improving network performance.

• Potential profitability for various participants: MEV provides opportunities for miners, searchers, block builders, and proposers to earn additional income. By strategically including transactions, they can capture value that would otherwise be lost.

• Innovation in transaction processing: MEV opens the door to innovative solutions for transaction processing, including batch auctions, fair ordering, and threshold encryption. These can mitigate some of the challenges associated with MEV and enhance the overall user experience.

• Collaboration with layer 2 solutions: Integrating MEV with layer 2 solutions (such as rollups) can create synergies, enhancing scalability and performance. It also allows for experimentation with different MEV models and approaches.

Community development and multiple technical proposal approaches to address challenges and how to move forward

Collaborative Strategies and Implementation Solutions

Various approaches, including diverse architectural solutions, represent collaborative strategies to address MEV challenges and help advance in a broader ecosystem. By leveraging diverse expertise and innovative solutions within the community, we focus on the following implementation solutions, reflecting the collective efforts to improve network efficiency, security, and profitability, nurturing a more resilient and adaptable blockchain infrastructure.

Bid Relay in MEV Infrastructure

The Bid Relay serves as a crucial bridge connecting various transaction stakeholders, simplifying the identification and utilization of MEV opportunities. Its bidding process not only ensures transparency and fairness but also optimizes profits for validators and searchers. By acting as an intermediary, Bid Relay enhances network efficiency, reduces congestion, and strengthens security while remaining consistent with the decentralization of the blockchain. Its integration is crucial for a robust, scalable, and fair MEV infrastructure, ensuring optimal transaction processing and profit maximization.

Let's first introduce the concept of Bid Relay.

Bid Relay: Managing MEV in Blockchain Networks

Bid Relay is a complex method for managing MEV within blockchain networks. Its focus is to create a more transparent, efficient, and fair environment for inclusive transaction bundling. Below, we'll discuss its components and the significance of each design element:

Components and Workflow

• Searchers: Identify MEV opportunities and send bids to the MEV Relay.
• MEV Relay: Centralizes the bidding process, collecting and aggregating bids.
• Miners/Validators: Decide on transaction inclusion based on proposals from the MEV Relay.

Significance of Each Design Element

• Role of Searchers: Creates a competitive environment where different entities can identify and bid on MEV opportunities, promoting innovation and efficiency.
• Role of MEV Relay: Acts as a transparent intermediary, reducing network congestion and ensuring a fair bidding process.
• Role of Miners/Validators: Makes informed decisions on transaction inclusion based on aggregated bids, enhancing network integrity.

Overall Importance

• Efficiency: Centralizing the bidding process reduces complexity and speeds up transaction processing.
• Transparency: Ensures equal access and understanding of the process for all participants.
• Profit Maximization: Promotes profit maximization for miners and searchers through a structured bidding process.
• Adaptability: Its design allows for implementation across various blockchain networks.

In summary, the Bid Relay MEV architecture provides a balanced and innovative approach to handling MEV. By focusing on the roles of searchers, MEV Relay, and miners/validators, it promotes fairness, efficiency, and transparency. Its unique design elements make it a promising solution for addressing ongoing challenges related to MEV in the blockchain ecosystem.

Pionex's MEV Solution Similar to Flashbots on BSC, currently with 9 validators:

Introduction

Flashbots is an open-source, permissionless, and transparent solution for extracting MEV (Miner Extractable Value) on Ethereum. As BSC is EVM-based, it can naturally replicate BSC through some modifications. The introduction of mev-boost in Ethereum has created a win-win situation for searchers, block builders, and proposers. In response, the BloxRoute team has proposed a solution aimed at implementing the same spirit of profit maximization and profit sharing on the BNB Smart Chain.

Overview

MEV-Relay proposes potential blocks to connected validators. Unlike validators, MEV-Relay can receive transaction bundles constructed by MEV searchers, maximizing profits for all stakeholders.

Architecture

This architecture integrates the roles of searchers, builders, and relays to generate the most profitable blocks using MEV builders. However, validator programs require additional modifications.

Execution

MEV-Relay proposes blocks: Within a given block, if a new block offers better rewards, MEV-Relay can propose multiple blocks. Validators verify and seal each proposed block with enhanced value.

• Validator Node Changes:
• Open HTTP Endpoint: Whitelisting the relay and implementing endpoints such as eth_proposeBlock and eth_registerValidator.
• Parallel Production: Validators also generate blocks from mempool transactions in parallel and submit the highest rewarding block to the network.
• Rate Limiter: Implementing a rate limiter on eth_proposedBlock via IP.
• Startup Parameters: Accepting parameters like miner.mevrelays and miner.mevproposedblockuri.
• Endpoints:
• eth_proposedBlock: Represents proposed blocks from the relay.
• eth_registerValidator: Validators compute the hash of the presented URI bytes to accept eth_proposedBlock and sign it.
• Validator Startup Parameters:
• miner.mevrelays: Destination for registering validators in each epoch.
• miner.mevproposedblockuri: URI where MEV relay should send proposed blocks to validators.
• miner.mevproposeblocknamespace: Specifies whether validators should use eth or mev namespace to accept proposed blocks.
• Timing: Initially, MEV-Relay proposes blocks 2.5 seconds after the start of the current block, due to the fast block time within the BSC network. Validators need to verify and propose a block within 3 seconds (for more information on the importance of these 3 seconds, refer to this blog).
• Customization: Customizing validator code is necessary, but long-term upgrade and maintenance costs are high.

Open Source Code

https://github.com/bloXroute-Labs/bsc-mev-validator/pull/1

Advantages

• Profit Maximization: By allowing MEV-Relay to propose potential blocks, this solution can achieve profit maximization for all stakeholders, including searchers, block builders, and proposers.
• Transparency and Collaboration: As an open-source project, it encourages community collaboration and ensures transparency in the development process.
• Parallel Production: Validators can optimize block selection by producing blocks in parallel from mempool transactions.
• Rate Limiting: Implementing a rate limiter on eth_proposedBlock via IP helps control traffic and prevent abuse.
• Enhanced Functionality: By implementing specific endpoints, methods, and configurations, this solution enhances the overall functionality of the BNB Smart Chain.

Drawbacks

• Customization Complexity: Customizing validator code is necessary, but the long-term upgrade and maintenance costs are high. This may be a barrier for some validators and will need to be updated according to the upcoming BSC upgrades.

• Potential Security Issues: Careless handling of opening HTTP endpoints and implementing new methods may introduce potential security vulnerabilities.

• Dependency on Validators: The success of the solution depends on whether validators are willing to implement the required changes, which may not always be guaranteed.

• Time Constraints: The fast block time within the BSC network imposes time constraints on proposed blocks. Validators need to verify and propose a block within 3 seconds, which may be challenging.

• Potential Centralization Risks: If decentralization is not considered during implementation, this solution may lead to centralization risks, where a few entities control most of the MEV extraction.

BloxRoute's BSC solution, similar to Flashbots, represents significant progress in profit and efficiency maximization within the BNB Smart Chain. While it offers numerous benefits such as profit maximization, transparency, and enhanced functionality, it also brings challenges related to customization complexity, potential security issues, and time constraints. Careful consideration and robust implementation are crucial to leverage the advantages of this innovative solution and mitigate its drawbacks.

BSC MEV - Leveraging Sentry Nodes

In the context of BSC, implementing MEV solutions can be complex, and there are potential risks to network stability as block size and the number of validators increase. Leveraging Sentry Nodes as part of the MEV solution provides a way to mitigate these risks and enhance network stability.

Architecture Overview

This architecture focuses on the use of Sentry Nodes, which act as protective barriers around validator nodes to ensure the network can withstand denial-of-service attacks. Key features of this architecture include:

• No changes to validator nodes: By centralizing MEV implementation on Sentry Nodes, validator nodes remain unchanged, enhancing network stability and security.

• Sentry Node modifications: Only Sentry Nodes require modifications, allowing for a more controlled and secure implementation of the MEV solution.

• Private connections between validator nodes and Sentry Nodes: Validator nodes establish private connections with their respective Sentry Nodes, while Sentry Nodes communicate with other nodes in the public P2P network.

• Security through isolation: Validator nodes are effectively surrounded by Sentry Nodes, isolating them from direct exposure to the public network and potential attacks.

• Configured push and pull mechanisms: Sentry Nodes are configured to use the Push method to send transactions to validator nodes, while using the Pull method for other nodes in the public P2P network.

• Monitoring and maintenance: Implement monitoring tools to track the performance and security of Sentry Nodes. Regular maintenance and updates are crucial for optimal operation.

In a P2P network, transactions can propagate in two ways:

• Push: Sending nodes directly transmit complete transactions to receiving validator nodes. This method is faster and is the preferred method in the BSC network due to the critical 3-second time window for block validation.

• Pull: Sending nodes only send transaction hashes, and receiving nodes pull transactions from Sentry Nodes if they are not locally available. This method is slower due to the additional back-and-forth communication.

Integration of MEV Builders

MEV builders can be integrated into the Sentry Node architecture to prioritize MEV extraction. By ensuring that Sentry Nodes only send transaction hashes to validator nodes and allowing MEV builders to send complete transactions, MEV builders gain an advantage in transaction arrival time. This prioritization enables more efficient and effective MEV extraction.

Some benefits of implementing through Sentry Nodes:

• Enhanced security: Sentry Nodes act as protective barriers around validator nodes, preventing direct exposure to potential attacks. This isolation provides significant advantages compared to solutions similar to Flashbots, where validator nodes may be more exposed.

• Stability: By centralizing MEV implementation on Sentry Nodes and keeping validator nodes unchanged, the core functionality of the network remains stable. Similar solutions to Flashbots may require broader modifications to validator nodes in the future, which could lead to instability.

• Scalability and flexibility: Sentry Nodes can be quickly launched or have their IP addresses changed. This flexibility allows for easier expansion and adaptation to evolving network conditions, which may be more challenging for solutions similar to Flashbots.

• Efficient MEV extraction: This architecture optimizes MEV extraction by prioritizing MEV builders based on transaction arrival time. This efficiency may be more challenging to achieve in solutions similar to Flashbots, where transaction propagation may be uncontrolled.

• Reduced maintenance costs: Implementing MEV through Sentry Nodes may require fewer changes to existing network infrastructure compared to solutions similar to Flashbots. This can reduce long-term upgrade and maintenance costs.

• Customization: Sentry Nodes provide a more controlled environment for specific optimizations and customizations for MEV extraction. Similar solutions to Flashbots may not offer the same level of control and customization.

• Alignment with existing network topology: Many networks already utilize Sentry Nodes for security purposes. Implementing MEV through Sentry Nodes maintains consistency with the existing topology, enabling a more seamless integration.

Implementing MEV through Sentry Nodes on the BSC network can provide a robust and efficient solution. By centralizing implementation on Sentry Nodes and integrating MEV builders, this architecture ensures security, stability, and efficiency. It represents a promising alternative direction for the continued development and enhancement of the BSC network, aligning with broader goals of transparency, profitability, and resilience in the blockchain ecosystem.

Overall

The BSC network faces a complex environment in implementing MEV solutions, and different approaches offer unique advantages and challenges. Two solutions have emerged: BloxRoute's Flashbots-like solution and the Sentry Node architecture. Both approaches have their merits but also bring unique challenges that must be carefully addressed.

The Flashbots-like solution provides a transparent, open-source approach to achieve profit maximization for all stakeholders. However, it requires extensive customization and may introduce security vulnerabilities and centralization risks. On the other hand, the Sentry Node architecture emphasizes security and stability by isolating validator nodes and centralizing MEV implementation on Sentry Nodes. This approach offers enhanced security, scalability, and efficiency but may also have its own complexities and limitations.

Future Directions and Conclusion

MEV represents complex interactions among various stakeholders, each seeking to maximize their own gains while maintaining network stability and integrity. To address the challenges of MEV, several architectural solutions have emerged, including Flashbots-like solutions and the use of Sentry Nodes. These approaches leverage diverse expertise and innovative solutions within the community, aiming to create a win-win situation for all participants.

Transparency is key to building trust and fostering collaboration within the blockchain community. Integrating MEV in a transparent manner, while ensuring blockchain explorers can clearly understand transaction processes, enables all stakeholders to more effectively comprehend and participate in the ecosystem.

For a more detailed research report on MEV, please refer to this link

The future of MEV in the BSC ecosystem holds exciting possibilities. From enhancing security and efficiency to increasing transparency and collaboration, MEV is poised to play a central role in the ongoing development of the blockchain space. With careful and innovative approaches to addressing challenges, validators, searchers, and the broader community can benefit from these advancements. The integration of MEV with explorers particularly represents an important step towards a more transparent and resilient network. Through a community-driven collaborative approach, the BSC ecosystem can fully harness the potential of MEV.

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