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Some Predictions on the
Future of MEV
Hasu, 25.08.2022
● Strategy @ Flashbots
● Strategy advisor @ Lido
● Long history of thinking about
MEV / blockspace markets /
transaction fee mechanism
1 – First L1 MEV mitigation techniques in the wild
● FCFS
● Threshold encryption
2 – MEV auctions will become the standard for efficient
extraction
● Maximizes MEV captured, and hence revenue, by block producers (not MEV
available!)
● Minimizes negative externalities for users
3 – Public mempools will dry up…
● Can iterate faster and lure users with features such as
○ Pre-trade privacy
○ Simulation
○ Account abstraction
○ More (later)
4 – …making exclusive orderflow a big problem
● Exclusive orderflow = inputs that one builder can use that other builders can’t
● Big centralizing force in the block building market
● At least two mitigations:
○ A decentralized solution that is pareto-optimal
○ Social conventions against sending OF to centralized purchasers
5 – MEV caused by users is returned to users
● PFOF, one way or another
● Hopefully, decentralized OFA
6 – Rise of cross-chain MEV
● Extracting cross-chain MEV is expensive
● Cost can be reduced if you have block ordering privileges across several
domains
● Need for cross-chain collusion marketplaces
7 – Latency starts to matter more
● FCFS sequencers
● Impact of mev-boost
8 – App level optimizations will drastically lower MEV
● Big incentive
● Hidden fee
● Especially arbitrage a low hanging fruit
Summary
1 – First L1 MEV mitigation techniques in the wild
2 – MEV auctions will become the standard for efficient extraction
3 – Public mempools will dry up…
4 – …making exclusive orderflow a big problem
5 – MEV caused by users is returned to users
6 – Rise of cross-chain MEV
7 – Latency starts to matter more
8 – App level optimizations will drastically lower MEV

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Some Predictions on the Future of MEV.pptx

  • 1. Some Predictions on the Future of MEV Hasu, 25.08.2022
  • 2. ● Strategy @ Flashbots ● Strategy advisor @ Lido ● Long history of thinking about MEV / blockspace markets / transaction fee mechanism
  • 3. 1 – First L1 MEV mitigation techniques in the wild ● FCFS ● Threshold encryption
  • 4. 2 – MEV auctions will become the standard for efficient extraction ● Maximizes MEV captured, and hence revenue, by block producers (not MEV available!) ● Minimizes negative externalities for users
  • 5. 3 – Public mempools will dry up… ● Can iterate faster and lure users with features such as ○ Pre-trade privacy ○ Simulation ○ Account abstraction ○ More (later)
  • 6. 4 – …making exclusive orderflow a big problem ● Exclusive orderflow = inputs that one builder can use that other builders can’t ● Big centralizing force in the block building market ● At least two mitigations: ○ A decentralized solution that is pareto-optimal ○ Social conventions against sending OF to centralized purchasers
  • 7. 5 – MEV caused by users is returned to users ● PFOF, one way or another ● Hopefully, decentralized OFA
  • 8. 6 – Rise of cross-chain MEV ● Extracting cross-chain MEV is expensive ● Cost can be reduced if you have block ordering privileges across several domains ● Need for cross-chain collusion marketplaces
  • 9. 7 – Latency starts to matter more ● FCFS sequencers ● Impact of mev-boost
  • 10. 8 – App level optimizations will drastically lower MEV ● Big incentive ● Hidden fee ● Especially arbitrage a low hanging fruit
  • 11. Summary 1 – First L1 MEV mitigation techniques in the wild 2 – MEV auctions will become the standard for efficient extraction 3 – Public mempools will dry up… 4 – …making exclusive orderflow a big problem 5 – MEV caused by users is returned to users 6 – Rise of cross-chain MEV 7 – Latency starts to matter more 8 – App level optimizations will drastically lower MEV