Original article: "A quick three-minute overview of Flashbots' new protocol MEV-Share, where users can participate in MEV revenue sharing"
Written by Peng SUN, Foresight News
MEV (Maximal Extractable Value) refers to the economic benefits that MEV searchers and block builders can extract after sorting unpackaged transactions. For a long time, MEV was notorious and was considered a general term for on-chain arbitrage transactions. MEV searchers often work with validators to find potential arbitrage opportunities. Among the many types of MEV attacks, the worst are front-running transactions and sandwich attacks, which cause huge damage and negative externalities to users and the Ethereum network.
MEV is an inherent component of the blockchain network, and its revenue has been flowing into MEV searchers, block builders, block proposers and the Ethereum network. However, as the direct source and biggest victim of MEV, Ethereum users, wallets, DApps and other order flow initiators cannot participate in MEV revenue sharing. In view of this, Ethereum infrastructure service Flashbots is also exploring a solution for MEV revenue sharing and launched a beta version of the MEV-Share protocol yesterday, aiming to distribute part of the MEV revenue to Ethereum users.
What is MEV-Share?
MEV-Share is an open source protocol that uses privacy and commitment to facilitate permissionless cooperation between users/order flow providers and MEV searchers. Order flow is aggregated in MEV-Share, which can both weaken the centralization of proprietary order flow in the Ethereum network and allow other order flow sources such as users, wallets and DApps to participate in MEV revenue sharing.
How MEV-Share works
The MEV-Share protocol introduces a “Matchmaker” that matches user transactions with MEV searcher transaction bundles, enabling searchers to further optimize their MEV capture efforts.
Flashbots runs a Matchmaker on the Ethereum mainnet, which has an endpoint for receiving transactions and transaction bundles, and an SSE Event Stream endpoint for sending pending events/transactions to searchers. Specifically, after a user submits their transaction to the Matchmaker, the Matchmaker will selectively share the transaction information with the searcher, and the searcher will listen to and receive new event streams through the SSE endpoint. The searcher then proposes a transaction for the Matchmaker and bundles it with the user's transaction. Currently, Flashbots only supports backruns, which will bundle the user's transaction with each valid searcher backrun and forward it to the block builder. The block builder will select the winning transaction bundle and return a portion of the searcher's backrun profit to the user.
If no valid trailing transaction is submitted, the transaction will be treated as a normal protected transaction and receive all the benefits of Flashbots Protect, including front-running protection, no failed transactions, etc.
How to use MEV-Share
The MEV-Share protocol is included in Flashbots Protect. Flashbots Protect is an RPC tool that can be integrated with user wallets to defend against robots that try to profit by front-running user transactions. In the Flashbots documentation, users can directly click "Connect Wallet to Protect" to connect to the Protect RPC through MetaMask.
Flashbots Protect users’ trades automatically flow to the Flashbots Matchmaker, which returns 90% of the MEV earnings generated by their trades to the user without the user having to do anything. By default, users connected to Protect will start a Matchmaker with a Stable configuration, which is continuously adjusted by Flashbots to optimize trade execution while protecting users from harmful MEV attacks.
In addition, wallet and DApp developers can also code in the language of the MEV-Share Matchmaker client library to send transactions directly to the Flashbots Matchmaker or send private transactions to the Matchmaker API.
MEV-Share functions and features
The biggest feature of MEV Share is that it allows users to adjust privacy settings and manage order flow sharing to prevent front-running transactions, and selectively share transaction information with MEV searchers, which can not only obtain "MEV redistribution rewards" but also ensure basic privacy.
Flashbots Protect RPC does not track any type of user information (IP, location, etc.) nor does it store or log any user information. MEV-Share users on Flashbots Protect can use custom privacy configurations, where parameters include Hints and Target Builders. By specifying hints multiple times, you can specify exactly which data fields in a user's transaction are shared with searchers on MEV-Share. Sharing less data will enhance privacy, while contributing more data will increase the chances of transactions being executed quickly and earning MEV income. Currently, the information that can be shared includes calldata, logs, function_selector, contract address, transaction hash, etc.
By default, Matchmaker will not share transaction information other than the transaction hash with the searcher. If the user requires complete privacy, they can add a "hash" hint to the Protect RPC URL, i.e. "https://rpc.flashbots.net?hint=hash". This will completely hide all transaction-identifying data sent to the searcher's Matchmaker, and the transaction hash cannot be used to obtain any information about the transaction or other sources.
If the user needs the fastest execution speed and the most MEV income, then calldata, logs, function_selector and contract address can be shared with low privacy, that is, "https://rpc.flashbots.net?hint=calldata&hint=logs&hint=function_selector&hint=contract_address&hint=hash". For more requirements and configuration details, please refer to:
At the same time, users can also specify target builders and specify which block builders to send transactions to. Currently, MEV-Share supports two target builders, "Default builders" and "Flashbots". It is worth noting that adding other builders can make user transactions faster and more reliable on the chain, but Flashbots does not control how other builders operate, nor does it guarantee their behavior.
Overall, Flashbots follows what Eric Huges said in the Cypherpunk Manifesto: "Privacy is not secrecy. Privacy is something a person does not want the whole world to know, but a secret is something a person does not want anyone to know. Privacy is the power to selectively reveal oneself to the world." Flashbots allows users to customize requests and share other information with searchers while ensuring the most basic privacy conditions.
In addition, for users who prefer the application layer, they need to find the right prompts and come up with the instructions that best suit them to achieve a balance between privacy and efficiency.
Future Development and Notes
Flashbots Matchmaker is an implementation of the MEV-share protocol, and the team is designing a standard interface for the entire protocol. In addition, the Flashbots team is still exploring new improvements. For example, providing users with customizable MEV income return ratios, allowing the recipient of MEV income to be specified, more privacy settings with default values for each protocol, and better execution preferences, allowing searchers to submit transaction packages containing more simple trailing transactions.
It is important to note that Flashbots Matchmaker is in beta and the Matchmaker service may experience service interruptions and API outages during the trial phase.