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A | Welcome to Bankless, where we explore the frontier of Internet money and Internet finance. This is Ryan. Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Bankless nation. Have you guys ever heard of flashbots? If not, you certainly should have. Flashbots is the silent protector ... |
B | First, this episode requires a bunch of prerequisite knowledge. So if you go and listen to this episode and you don't know what MeV is or searchers or block builders or proposer builder separation, you'll actually kind of still be able to catch a vibe if you don't know what these things are. There are historical episod... |
A | All right, guys, let's get right to the conversation with Phil and Andrew. But before we do, we want to thank the sponsors that made this possible, including bankless nation. |
B | I would love to introduce you to Phil, Diane, a crypto economic researcher. Phil is the lead author behind the landmark paper Flashboys 2.0, where he introduced and defined the mev problem in the Ethereum landscape. Over four years ago, he introduced MeV. That's kind of a big deal. He's also the co founder of Flashbots... |
C | Thank you so much for having me. |
B | And new to bankless, we have Andrew Miller, an associate professor at the University of Illinois, SGX Bull, and visiting researcher at flashbots, and also a big believer in cypherpunk values through crypto economic mechanisms. Andrew, welcome to Bankless. |
D | Yeah, great to be here. |
B | So there's this thing going around in the crypto world called suave. If anyone who's paying attention to Mev knows this thing that is suave, suave, to me, is this confusing concentration of a bunch of nebulous ideas all instantiated into one single place. So here on this episode today, we're going to try and parse out ... |
D | Let's do it easy. |
B | So I think in order to really understand suave, we actually kind of have to go back in time and kind of run through the idea maze that I think is flashbots. Flashbots has this crazy, awesome arc to it, and it's been one of the cooler stories that I've been following since my early days in crypto. Phil. I think in order... |
C | Yeah. So I think my particular journey through MeV, everyone has their own, took many, many different directions. But the TLDR is about four or five years ago, I noticed that there was kind of a common problem that was coming up in different things I was researching at the time, I was a PhD student thinking about the q... |
A | I'm wondering, Phil, if you could kind of describe the problem that you saw that people at the time didn't. So people thinking about blockchain as a bulletin board, and you're seeing it in a different way. And you are a decentralization, Maxi, self ascribed. So I'm taking that to mean you saw the decentralized properti... |
C | Well, I think the fundamental problem is that what blockchains try to and need to do for them to work is to come up with an order of events, of transactions that they're processing and kind of communicate to everyone that this is the order that we all, except for these events or these transactions, I think people hadn'... |
B | One of the reasons why I think many people who are in crypto for the tech come to crypto is they see the equitable foundations on which these platforms, like Ethereum, like bitcoin, provide to the world. I think, Phil, what you identified in MeV is like, oh, we do have this equitable foundation, but MeV can tilt it int... |
C | Yeah. So MeV Boost came out of a line of research called PBS, or proposer builder separation. Highly recommend reading up on that if you're not familiar with it. This was many people's kind of memes, spearheaded mainly by Vitalik, I would say, but with many kind of contributors in the community. And this is the idea of... |
A | Next phase, the relayers. Right, being one of those trusted parties. And I believe it's what, 90% to 95% of validators are now using mev boost at this point in time. So you guys have been pretty effective with this. One of my favorite parts of this story, Phil, is not only were you in the flashbots team responsible for... |
D | Yeah, that's right. Well, I come from this from a different perspective. Starting from privacy technologies, I've kind of spent the most time doing research on, I mean, the whole stack of things, like zero knowledge proofs and multi party computation and so on. And I've spent the most time working with zcash, and they'... |
A | So, Andrew, safe to say Phil doesn't have it all figured out with respect to Mev. He needs some help, particularly on the privacy side. He needs a team around him to actually help him achieve some of these objectives. |
D | Yeah, that's the case. You can't just stare at Phil and wait for the entire program. |
A | That's what I've been doing. |
B | That's what we've been doing. |
D | I'm stunned that Mev is still an open problem at all, but now we're. |
A | Kind of staring at both you guys. I'm wondering, Andrew, if you share this intuition that Phil stated earlier that if we don't solve the MeV problem, you're talking about crypto values and libertarian values and identifying with the cypherpunk manifesto. But if we don't solve this problem, it could potentially lead to ... |
D | Yeah, I mean, I've heard this described as the flashbots doomer thesis. I find it fairly compelling. I think all credit to Phil for, like you said, accurately prophesizing a problem just in time to see it actually take place, and then be able to kind of identify paths towards solutions of it that doesn't come around so... |
B | We've been setting the stage what I think is going to be a good place to bring up suave here we have the history of flashbots and MeV Boost and the mechanism design that that has created to contain some of the MEV. Then, Andrew, we're bringing in some privacy and some further mechanism design tools to add into the mix ... |
C | I mean, I think the distinction between solving and harnessing MeV is actually very small. Like, I think ultimately, MeV is basically about what is the power distribution in your system, how is information propagated and who profits off that. I think you can always very easily solve it through centralization, essential... |
A | As we get into what is suave and we ask that question, I'm not going to ask it yet. I just want to set this up with one other question, which is what outstanding mev problems still exist that suave is really teed up to solve? Give us the problem set here. Andrew said earlier, I think Phil's got the MEV problem. Well, i... |
C | Yeah. So I absolutely don't have the mev problem, which is actually why I wrote the paper. For two or three years before the paper, I tried to solve it by myself and with a few collaborators on the whiteboards, and I went down all sorts of different directions, including social choice theory, fair ordering, auction the... |
D | Also, so much of that kind of space about what you can do with suave or any system connect with open problems in market structure. That's all, I think, open even in the tradfi world. And so, yeah, and I don't have so much insight on kind of those. I mean, I have a kind of simplified mental model of what a sufficient nu... |
B | I think we've done a pretty good job actually defining the spirit of suave and the goals of suave, the contours of suave. But I think it's about time now to actually approach this conversation head on. So Phil, what's suave? |
C | Suave? Suave is the single unifying auction for value expression. So it's a platform, it's a set of tools, and also systems that are deployed, including distributed systems, including nodes and things like that, to basically allow you to write applications that have several properties. Number one, their privacy enabled... |
A | Okay, so it is a platform and tool, and a set of tools for solving MEV problems in its most generalized form. Is that correct? |
C | I. Yeah, you could also use it to possibly solve problems outside of MEV. Although when you get to the edges, there's a question of is this MEV or not? Because it depends how you define the world and things like that. So for example, ad auctions is another one. I'd say the most general is like it's a platform for build... |
A | So would MeV boost be an example of an app on top of Swav? Or is MeV boost something separate? |
C | Yeah, I think the MeV boost, it can interact with suave in many ways. So certainly you could build a credible Mevboost validator on suave, where the validator essentially commits to taking the highest bid. In Mevboost, you can also build various components. So Mevboost itself is like an overarching name for the protoco... |
B | I think we're about to enter this phase in this conversation where it's a bunch of blind men feeling the elephant and we're like, is suave like this? Is suave like that? |
A | Yep. |
B | So I'll throw this next one at you. Suave kind of feels like a mempool of sorts where like currently, what do I do? I write my uniswap trade and I broadcast it everywhere. And then I just cross my fingers that I didn't get bitten by some mev bot too badly, but I probably did. Instead, I could submit a transaction to su... |
C | Yeah, I want to hear also Andrew's take on what suave is, because he's a professor and he's more eloquent than I am in this kind of stuff. But I think, yes, that is one way you could use suave. So, like, going back to suave being a platform, I think an encrypted mempool is certainly one set of apps we want to build and... |
B | Andrew, how do you define suave? |
D | Let me first just answer the last question about the definition as a mempool. I guess I'm trying to come up with things that suave can do that aren't captured by having a protected mempool in that case. So it's definitely at least able to do an encrypted mempool. That's a motivating application. But other things that m... |
B | Okay, so there's computation that can run on top of suave. So not only is a suave a place for you to deposit transactions into, but it's a place where people can run computations on top of those transactions as well. |
D | Yeah, that's necessary for most of the interesting applications like complex auctions to work. |
B | So we've recently been exploring this world of intents right on bank lists. And kind of the way that I understand one of the power of intents is that intents can be matched prior to settlement and in a more efficient way, where less people are using gas, there's more, less slippage. And to me, swap is perhaps like a me... |
D | Sounds right to me. |
C | Yeah, I mean, I think that's correct. I think one of the underappreciated factors is like, where does mev actually come from? One place it comes from is conflict. So fundamentally, like, I want to include my transaction. That's worth money for me. You don't want me to include my transaction because it gives you a worse... |
D | I take issue with the notion of matching intents. I basically think it's not sufficient to kind of understand what's going on. So I mean, intents kind of have two components, I think of. I mean, I'm on the intense or kind of glorified limit order side, so that terminology is the simplest. But there's two parts, right? ... |
A | Okay, so we're beginning to get the shape of the elephant here, right? But just like we're still feeling it around. So weve got this private mempool that is maybe programmable. Phil, Ive heard you say elsewhere, that is maybe Mev aware. And its not inside a specific blockchain. So its like a pre mempool mempool. Its ou... |
D | Phil probably has a better answer here, but those both seem kind of simple. Suave will have a suave chain that's able to do consensus, maybe faster, with some different trade offs than Efel one consensus. But being able to have some notion of coordination and consensus is kind of necessary for coordinating these. And t... |
C | Yeah. No, I mean, I think I agree with everything Andrew said. I think the most broad view is like, suave. Is this platform the same way? There's a question of, like, what is ethereum? Is optimism ethereum? Like kind of, kind of not, you know, it's like it depends where you draw, draw the line. I think yes, a blockchai... |
A | So there is a swap chain. It is a blockchain. But that term can also be misleading because people's existing mental models for blockchain are generally something like bitcoin or ethereum. And a primary use case for these blockchains is storing your value across time. It's very much like ten years from now, my assets be... |
C | Yeah, I think that's largely true, especially for the first wave of applications, and especially because blockchains do such a great job on long term secure storage, and there's no reason not to leverage their validator set, et cetera there. I think what's missing is this kind of other way. One interesting maybe discus... |
B | I want to take a new lens for viewing suave, and that's through the lens of being a decentralized block builder. Phil, can you talk about how suave is a decentralized blockbuilder and where those blocks actually go and what that even means? Can you just explain that process, Phil? |
C | Yeah, so the idea of decentralized block building is essentially once you have privacy, you can decompose what happens inside a blockbuilder into different kind of processes and different parts. And there's really nothing fundamental that says that these processes need to occur on a centralized server or in one place. ... |
B | You've been using this idea of apps on suave. Are apps on suave kind of a way of putting all of these mev searcher bots, and then also larger bundlers into applications that are actually instantiated in suave. Instead of people running their little mev searchers on their computer, parsing the mempool and trying to eke ... |
C | Correct? |
B | This is how this works? |
C | Yeah, I mean, I think for searchers, you have options. So, like, the easier or the less lift would be basically look at the activity you're doing saying like arbitraging, let's say a centralized exchange and a decentralized exchange. Are there modules you can port into this decentralized world that offer you some benef... |
B | The world of blockbuilding competes on order flow. So whichever block builders have the most amount of order flow, the most amount of transactions flowing through their system that they have and no one else has, that block builder is going to be able to produce a more valuable block and become more profitable of an org... |
C | Yeah, I think fundamentally my thesis is that the value of decentralization and the amount of surplus that unlocks in the economy is far higher than the technical overhead of decentralization. Again, I think that's dependent on the use case very much. We see USDT on Tron being very popular and not very decentralized, a... |
B | And just to tie a bow on this block building section, what does a block builder do? A blockbuilder builds blocks. It produces blocks. And if suave is a decentralized block builder, the ultimate output of suave is a block. And then some Ethereum proposer, some ethereum validator is like, oh, thank you, suave, for the bl... |
C | Yes. |
A | So during this entire time when we've been talking about suave, we've used the term private many, many times. And Andrew, I know you have a particular interest in that space. In fact, that's maybe part of the reason you've decided to team up with flashbots and fill in the team over here. Tell me, why is privacy of suav... |
D | Well, I mean, privacy here relates to trust in the same way. If you say you're trusting a blockbuilder, what are you trusting them not to do? And it's probably sufficient just to say, what do you need privacy for? To avoid getting front run and sandwich attacked. So whoever has your data and is computing on it, so like... |
A | Andrew, people, sometimes I've heard say SGX has backdoors. It's not secure enough, this type of thing thing. What do you say to those criticisms? Why is it the right technology for suave? |
D | It's the right technology just because there's no other viable alternative right now. And I think that with the right system design around it, it's just good enough to be useful for this kind of credible computation. It's earned its reputation as a train wreck. It's had on a pace of maybe one per year or so for six yea... |
A | Term data storage forever, basically because we're coordinating the present and these things are sort of short lived. It's a fine technology for something like that, but it might not be SGX, for instance, for a blockchain, for like a zcash for instance, or for an ethereum. SGX might not be the right technology for a la... |
D | Well, I mean, I think it is for those too. So the problem is that SGX should not be. SGX should be used when there's really no other alternative. And so this is kind of fundamentally when there is shared private state that you need. So if all you're doing is token transfers, you should just use zcash in a shielded pool... |
A | Good thoughts there. We've got this suave as this private, programmable, mev aware Mempool that produces this thing of great value, which is one of the apps, is decentralized block building. Phil, could we just really quick rattle off the wins here from various stakeholders? If I'm Ethereum and suave is in existence, a... |
C | Yeah, well, I think for chains, what it's really giving you is the option to mitigate a lot of centralization, pressure your chain through these apps, so things that would normally make your chain more centralized give certain incentives to the biggest validators. You get some options to design solutions that basically... |
A | Underline that for a second. The value for a chain, maybe we'll take Ethereum. The value for Ethereum, the suave in existence, is greater decentralization. And after all, isn't that the purpose of blockchain and crypto decentralization, so that we can preserve these things like censorship, resistance, and diffusion of ... |
C | Yeah, I mean, I don't think it's always the goal of every chain, but I agree, as a community, yes, that should be, and is our goal, I think, for things like Bnb or some specific optimism, l two, that's maybe more. |
A | Centralized, for whatever reason, or you mentioned Tron, with USDT. |
C | Tron with USDT. Yeah. So anyway, I think the incentive is less from that bolstering decentralization point of view. There still is some incentive of accessing the value of that decentralization. So if in that decentralized pool of preferences, there's valuable preferences on your domain, you maybe want to tap into that... |
A | Let'S say, when you say preferences, is that the same as an intent fill by the way? |
C | You can read it the same way? Yeah, call it an intent. So if you have a cross domain, let's say intent, in that case, you want to be able to access that on, you want to be able to leverage that as much as possible, which may require if it's protected by this decentralized private block builder actually engaging in that... |
A | Which could be huge. That could be huge. Okay, so how about a layer two? What benefit do you get from that? From suave? |
C | Yeah, so a layer two, I think it basically is roughly the same thing. I think a lot of layer twos are in a very hard place right now looking at what to do with their sequencer. There's several choices. They can essentially run a centralized sequencer, which is what all the major ones are currently doing. Oftentimes the... |
A | Would this be like Eigen layer restaking type of scenario? |
C | Are you thinking that, for example? For example, yeah. Or, you know, I think there are some research proposals out to even extend l one to, like, offer some of this as like a service, essentially. So, I mean, I think the choice there is, like. I think that is an interesting trade off point. I expect it will be explored... |
A | How about alternative layer one ecosystems? So some of these very high throughput, non Ethereum chains, like Solana, comes to mind, or like aptos or sui, often from the outside looking in a little bit, I often feel like these ecosystems just haven't really addressed the MEV problem. And I worry a little bit with naive ... |
C | I think there will be. I think that's less been our focus, given our limited resources in the last, let's say, six months. But it's for sure part of the design, the single part, means we need to support those use cases. I think there are fundamental limits, given your system design, on how much you can decentralize. So... |
D | Yeah. I have less thoughts on the low latency applications. To me, the benefits and execution quality that you get come from batching often. So I mean, you can build a slightly higher application, higher latency application on Solana if you want. I don't think that there has to be an inherent overhead associated with d... |
A | I want to get to the users, which is the last stakeholder and the benefits they get. But just a quick. Because I'm tempted here, just a quick side quest for you guys. Do you share my intuition that many crypto ecosystems just are naive with respect to mev assumptions right now, and that will come back to kind of bite t... |
C | Yeah, I think this is actually super interesting. It's maybe a special case of something we see more generally in blockchains and the broader metagame of making a new chain. Oftentimes sustainability is actually not what matters for new projects. I think gas fees to me, are the clearest example of this. It's very easy ... |
A | Yeah, that's a great point. Thank you for indulging that sidequest. All right, so the last set of stakeholders is users. Can we talk about user welfare? In a world where suave exists, how do they stand to benefit? |
C | Yeah, so, I mean, my thesis is pretty simple, which is like, you will not internalize the value of your data, of your transaction as a user unless you have privacy. There's just no market structure in which you efficiently do that. Why? Because like, what are your choices? You can sell it to someone, but then you have ... |
A | Can I just summarize? Maybe all of this, all of the wins for stakeholders. I wonder if it just is as simple as this. If we want a system that is different than tradfi, suave helps make that possible, suave helps enable that. Or it's a shield to prevent our system from becoming more like the tradfi banking system we jus... |
C | I think that's part of the. Yeah, I think that's accurate for Mev. I think the obvious thing to do from here is to just redesign tradfi. I think in doing so, we'll lose a lot of what's made crypto valuable and special and interesting to a lot of people. And I think we deserve alternatives. So the role of swab is to may... |
B | One thing that property about suave that I find interesting is it's very meta, like being pre blockchain, being in the mempool or even pre mempool layer is a very meta place to be. One of the problems that I'm seeing being solved in 10,000 small ways is the fragmentation of ethereum scalability, roadmap. 50 new roll up... |
C | Yeah, definitely. I mean, I think there's many different types of centralization, and it's important to kind of think about which one you mean. So one type of centralization that's actually very useful and helpful to other types of decentralization is logical centralization. So this is kind of what the EVM provides. It... |
A | That's the meme here. Mevm, yes. |
D | Is it the machine for Mev or the Mev machine or Mevm. Meevm? Mev. |
C | The Mev. Ethereum virtual machine, maybe? |
A | I don't know. You got to workshop that. |
D | Yeah, but no, I just wanted that. So, I mean, the abstraction is basically, there's now this abstraction of a MEV time application that you can write as a smart contract application. So what's happened is I thought of it as a separating thing, but it'll be a unifying thing here as an abstraction, but it's a separating ... |
A | A new abstraction, almost like a solidity for block builders then. Andrew? |
D | Yeah, exactly. |
B | One property that I learned that was interesting going back to this abstraction of Ethereum's layer twos, is that it actually works equally well with other layer ones. It's like having token a on the Ethereum layer one and desiring token b on like an Ethereum layer two. An intent can get you there. A market maker can h... |
A | Power of that is, I know, I just almost feel like emphasizing is the left curve, like take on this, this is going to fix crypto UX. Is that true? Is there something to that? |
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