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Collection for podcasts • 511 items • Updated • 2
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A | If you look at the original Xbox games, the graphics sucked. And then if you looked at the late stage Xbox games, graphics were like orders of magnitude better. But it was the same hardware. How did that happen? It's because the software got better. And so this is the software of Ethereum layer, improving what we can d... |
B | Hey, bankless nation, we've got a new show format for you. This one's short, punchy. The deepest dive into a crypto rabbit hole that David and myself are exploring. These are our takes. Take them or leave them. 25 minutes max. It's gonna be our punchiest episode ever. Right, David? |
A | God, it's pretty ambitious. If they were gonna do this in 25 minutes or less, it would be a first. |
B | Each of these episodes will focus on one specific theme. On today's episode, we're talking about an article that David published recently in the Bankless newsletter. It's called a hitchhiker's guide to riding an MEV bot. David, why'd you write this article? Why is this topic important? |
A | Yeah, because every once in a while, we go down collectively, the crypto world goes down the crypto rabbit hole, which we're all carving out, and then we find something new. We find something while we're digging in the crypto rabbit hole. And what we have found recently is this, what the world of the MeV industry of cr... |
B | I completely agree. This rabbit hole goes deep. So we're going to begin exploring it in today's episode. But first, we disclosed nothing big or specific in this episode. Both David and I hold ether. Uniswap X is a subject of today's episode. Uniswap has previously been a sponsor on the Bankless podcast. This is my time... |
A | So I use metaphors when I write. I think it's the best way to explain some of this stuff. And so I start this article with this metaphor of Ethereum as just one gigantic ocean of liquidity. If there's like one activity that we do on Ethereum, it's swapping tokens, like ethereum. If you want to be ultra reductive and ki... |
B | The term ocean is kind of interesting too, because ocean implies some depth, right? You can have more shallow parts of the ocean. You can have deeper parts of the ocean. I. |
A | Yes, there's that. Yeah. And that relates to this term called liquidity, right? And we all know what liquidity is in crypto. It is just the how deep market, like, order books are on an exchange or how much assets are in a uniswap liquidity providing position. There's this, like, fundamental relationship that, like, at ... |
B | Yeah. And you are using. So if you picture Ethereum as this ocean of liquidity, right. In the rest of this article, this kind of resonated with me. You use this metaphor of ships and you say this at the beginning as swappers on Ethereum, we're about to upgrade our ships, moving from gas guzzling clunkers that blast thr... |
A | It's like a bulldozer going through the water, just like pushing the water around it, just leaving a massive wake. It's got this messy pipe that's just burning oil at the back. It is just brute forcing its way through the water. Yeah. |
B | All right. And you're calling that the on chain dextrade, which is. Now. That's where we live. |
A | That's the icons meta of things. |
B | Yeah, I use uniswap. That's an on chain dextrade. So you're saying that's like a big freaking tugboat? |
A | Yep. |
B | And then you've got this other side juxtaposes, you say, off chain, signed order. I don't. I have no idea what I'm looking at. But this looks like a stealth yacht. It's making. It's going through the ocean, but it's making very little waves, very little movement, not much wake. And you're calling that the off chain sig... |
A | Yeah. So both of these images are actually made with mid journey, just to aesthetically please. |
B | Really? |
A | Yeah. |
B | I could tell the second one was. I didn't know the first one was. |
A | Yeah, the first one definitely was. Well, think about how big all those wakes are. I think the prompt was, like, metal heavy tugboat with massive wake or something like that. Okay, so I was. So, actually, can you pull up another tab and type in c shadow ix 529. |
B | C shadow. |
A | Yeah. Okay, see, shadow ix 529. Yeah. Oh, Ix stands for what was this thing? Okay. Okay, so now. Now type in f f 117 Nighthawk. You can just do f 117, f. |
B | One, one seven Nighthawk. Okay. F 117. |
A | Mm hmm. Yeah. So this is stealth. This is a stealth fighter. Famous stealth fighter. Right. Developed by Lockheed Martin. They have all the ship. This is a plane. This is a jet. This is a stealth jet, one of the first stealth jets ever. And the angles on this ship are meant to absorb radar and also not leave awake. And... |
B | Ooh, these. These metaphors, these analogies are starting to stack up here. Okay? But so before we continue on that, we'll park this idea of two different ships. An on chain dextrade. Messy, huge, like, wake. It's just pushing the water out of its way. Off chain signed order. Stealthy, sleek, cutting through water, uh,... |
A | Yeah. So an off chain signed order stands in contrast to an on chain dextrade. So an off chain signed order, it's actually pretty similar to an on chain dextrade, except that you don't actually execute it as a transaction. And because of that property, you can construct your transaction differently than if you had on, ... |
B | So no gas? |
A | No gas. |
B | You just signed transactions. |
A | Yeah. So, like, you can take an ethereum transaction that you would broadcast to the mempool, and then you can just sign it and not broadcast it to the mempool, and that becomes an off chain signed order. So, like, an off chain sign order is like a precursor to a transaction that's on chain, but it does not become a tr... |
B | So that's why we call these intents, right? It's an intent. So I intend to provide 2000 USDC in exchange for one ethereum. And you kind of broadcast that. You're not broadcasting that on chain. You're broadcasting this to all of the MEV bots. |
A | You're broadcasting it to the mev stack, which is usually the thing that you're trying to hide from, but instead you just actually tell them what you want. That is the big unlock. |
B | Who's in the MeV stack? What is the. |
A | All the monsters. So you have me, you have MeV arbitrageurs, like liquidity pool balancers, sandwich attackers. Um, you've got like just DeX arbitrageurs. So if two different pools on Uniswap and Sushiswap are unbalanced, then they'll reorder, reorder. It's the entire spectrum of possible arbitrage opportunities are en... |
B | It's the hive. It's whoever can make a profit, whether these are like market makers or bots or some combination, anyone who is willing to make a profit on this exchange here, right? |
A | And part of this stack is it's probably becoming very, very verticalized. So market makers and mev bots are probably collapsing into the same vertical, for example. So this just turns into a vertical of like, the, the efficiency checkers of Ethereum markets. So like, if anything is disturbed in Ethereum, then they will... |
B | This is kind of cool. Going back to that example, if you have 2000 USDC and you want one ether for that, so say you broadcast your intent to this bot network, as you're saying, to buy one eth on optimism. Using 2000 USDC, you start your offer at 2010 USDC, and ratchet the order increments downward to 2000 USDC. With th... |
A | I'm just making these numbers in this scenario. |
B | Yeah, of course. And this process goes. Goes down until some, you say to some bot finds the price point at which it wants to fulfill this order, and then suddenly pop out of the swarm. A single ship emerges, darts forward, grabs the payload, and stuffs it inside of it, and zips off to the horizon to fulfill the job. Wh... |
A | So I'm glad that this, like, little scenario that I made up made sense to you, because I actually effed up and got the numbers wrong. It should actually go up, not down. And so I should have said, like, we start the price at $1,990, and then it increments upwards until a bot actually fulfills that. But, like, the idea ... |
B | You've got this analogy of, like, pauly tradies from dune riding the sandworm here, and you say, instead of fighting Mev bop monsters, we ride them. Basically, what you're doing is you're using all of these sandworms, essentially, and you're using them for your own purposes, when normally they just want to eat you and ... |
A | Uh, there's so, yeah, there's a number of like 2nd, 3rd order consequences. I think the easiest one to understand is that you actually don't need to, um, spend gas anymore. Um, the gas cost of your transaction just comes as a spread. And so it's just part of the USDC that you pay to buy your ether. You're just going to... |
B | It does, yeah. You say this in your article with intents. A lot of the complexities between cross chain liquidity, chain swapping, and bridge selection are all choices that will be made by the technical back end service providers, by essentially, these MeV bots are making that choice, am I reading that correctly? And a... |
A | Yeah, 100%. So it really puts the synchronicity back into Ethereum, where every single layer two is an asynchronous network. But the MEV bots work to make them all synchronous networks once again. They synchronize the state, the state of liquidity across all of these layer twos and people experts are, you know, work fo... |
B | Okay, so what does this paradigm shift, I guess, in closing, really, really mean moving forward? I think there's more to unpack in this rabbit hole, and we certainly haven't unpacked everything today. I think a lot of the bankless episodes in the future will be sort of going deeper down this rabbit hole. Obviously, ord... |
A | Yeah, the convergence of this, these players, these off chain players, is like the convergence between MEV experts and market makers. So, like tech and capital, how these landscapes converge is going to be interesting, how much we can actually squeeze into one of these things. So, like I said, you could put like 10,000... |
B | It it totally is. And I think there's a lot of investable opportunities that, um, that you could find here around sort of how the MEV supply chain, the block builder supply chain, is going to completely change how all of these orders are going to be aggregated, what this means for the future of exchanges. If you actual... |
A | Live, but it's not live by default. You can go and set it to live, and you can make some trades on uniswap X. |
B | There's, of course, cow swap as well. That's a swap cow fi. That's basically when you put a transaction, when you put an intent in, that's actually the MEV bots that are fulfilling, that are filling that transaction. So you can see how it works that way. So a lot more on this in the future. David, is there anything els... |
A | I'm sure there's going to be more articles that are continuations of this, and so stay tuned for that. |
B | Hope you liked the episode Bankless Nation. We've got some action items for you, including David's article, a hitchhiker's guide to riding the MEV bot. There's also some episodes that we've done previously on Uniswap X, one with Dan Robinson that you absolutely, you have to go check out. We'll include those in the show... |
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