diff --git a/docs/_sidebar.md b/docs/_sidebar.md index 4177510f..12cbd61a 100644 --- a/docs/_sidebar.md +++ b/docs/_sidebar.md @@ -4,6 +4,7 @@ - **Study Group** - [EPFsg overview](/eps/intro.md) - Schedule + - [Week 0](/eps/week0.md) - [Week 1](/eps/week1.md) - [Week 2](/eps/week2.md) @@ -57,9 +58,9 @@ - Sharding - Statelessness - Purge - - MEV + - [MEV](/wiki/research/PBS/mev.md) - [PBS](/wiki/research/PBS/pbs.md) - - Censorship + - [MEV-boost](/wiki/research/PBS/mev-boost.md) - Proof of Stake - [Upgrades](/docs/wiki/research/Beacon%20Chain%20Upgrades.md) - SSF diff --git a/docs/images/pbs/mev-boost.png b/docs/images/pbs/mev-boost.png new file mode 100644 index 00000000..f1886cff Binary files /dev/null and b/docs/images/pbs/mev-boost.png differ diff --git a/docs/images/pbs/scourge.png b/docs/images/pbs/scourge.png new file mode 100644 index 00000000..9952aa57 Binary files /dev/null and b/docs/images/pbs/scourge.png differ diff --git a/docs/wiki/research/PBS/current-state.md b/docs/wiki/research/PBS/current-state.md deleted file mode 100644 index 7ec616af..00000000 --- a/docs/wiki/research/PBS/current-state.md +++ /dev/null @@ -1,42 +0,0 @@ - - -# Current State - -Currently, PBS (Proposer Builder Separation) exists outside of the protocol by builders helping in block building through entities like relays. This design relies on small set of trusted relays and even builders which introduces centralisation risks and makes Ethereum more vulnerable to censorship. -PBS is not yet implemented in the Ethereum mainnet which means validators act as both proposers and builders. So each validator is responsible for: - -1. **Selecting transactions:** Validators choose which transactions to include in a block based on factors like gas fees and transaction priority. -2. **Building the block:** Validators assemble the chosen transactions into a block and perform necessary computations like verifying signatures and updating the state. -3. **Proposing the block:** Validators propose the constructed block to the network for validation and inclusion in the blockchain. - -However, some clients are actively developing and testing PBS implementations. These implementations aim to separate the builder and proposer roles, allowing validators to outsource block construction to specialized builders. This can lead to several potential benefits: - -- **Increased validator rewards:** Builders can compete to create the most profitable block for the proposer, potentially leading to higher rewards for validators. -- **Improved network efficiency:** Specialized builders can optimize block construction, leading to more efficient block propagation and processing. -- **Reduced centralization:** By decoupling the roles, PBS can potentially reduce the influence of large mining pools or staking providers that currently dominate both block building and proposing. - -## PBS and the Relationship Between Relays, Builders, and Validators - -Proposer-Builder Separation (PBS) also introduces a more intricate relationship between different actors in the Ethereum network: - -1. **Builders:** - - Builders are specialized entities that focus on constructing blocks with optimal transaction ordering and inclusion. They compete with each other to create the most profitable block for the proposer, taking into account factors like gas fees, transaction priority, and potential MEV (Maximal Extractable Value). - - Builders do not directly interact with the blockchain. Instead, they submit their constructed blocks to relays. -2. **Relays:** - - Relays act as intermediaries between builders and proposers. They receive blocks from builders and forward them to proposers. - - Relays can perform additional functions like block validation and filtering to ensure that only valid and high-quality blocks are sent to proposers. - - Some relays may specialize in specific types of blocks, such as those with high MEV potential. -3. **Validators (Proposers):** - - Under PBS, validators take on the role of proposers. They receive blocks from relays and choose the best one based on predefined criteria, typically the block that offers the highest reward. - - Once the proposer selects a block, they propose it to the network for validation and inclusion in the blockchain. - - Validators are still responsible for securing the network and ensuring consensus on the blockchain's state. - -This separation of roles creates a more dynamic and specialized block-building process. Builders can focus on optimizing block construction and extracting MEV, while proposers can focus on selecting the best block and maintaining network security. - -However, this new relationship also introduces new challenges: - -- Security: Introducing new actors and dependencies can create new attack vectors and vulnerabilities. -- Centralization: If only a few powerful builders or relays dominate the ecosystem, it could lead to centralization and censorship concerns. -- Coordination: Effective communication and coordination between builders, relays, and proposers are crucial for the smooth functioning of PBS. - -It's important to note that the specific roles and responsibilities of relays and builders may vary depending on the specific PBS implementation. diff --git a/docs/wiki/research/PBS/mev-boost.md b/docs/wiki/research/PBS/mev-boost.md index 36771fa6..f1e92d8c 100644 --- a/docs/wiki/research/PBS/mev-boost.md +++ b/docs/wiki/research/PBS/mev-boost.md @@ -23,6 +23,19 @@ Here's how mev-boost works: Validators running mev-boost software act as proposers. They receive blocks from relays and choose the best one based on predefined criteria, typically the block that offers the highest reward. The proposer then proposes the selected block to the network for validation and inclusion in the blockchain. +## PBS Block Creation + +The process of block creation through PBS works as follows: + +### Block Construction + +- Builders continuously monitor the transaction pool (mempool) for new transactions. They assess these transactions based on potential MEV opportunities. They select the transactions that best align with their MEV optimization criteria. Also, block builders can take transaction bundles from private orderflows, or from MEV searchers, just as miners did in PoW Ethereum with the original Flashbots auctions. In the latter case, builders accept sealed-price bids from searchers and include their bundles in the block. +- Once the transactions are selected, builders assemble them into a block ensuring that the block adheres to the Ethereum protocol's rules, e. g., txs are valid, the gas limit is not surpassed. + +### Block Auction + +Instead of builders directly offering their assembled blocks to validators with a specified price, the standard practice is to use relays. Relays validate the transaction bundles before passing them onto the proposer (validator). Also, implementations can introduce escrows responsible for providing data availability by storing blocks sent by builders and commitments sent by validators. The auction process works as follows: + ### Benefits of mev-boost: - **Increased validator rewards:** By outsourcing block building to specialized searchers, validators can potentially earn higher rewards through optimized transaction ordering and MEV extraction. @@ -41,7 +54,3 @@ Ongoing research and development are focused on addressing these challenges and It's important to note that mev-boost is just one implementation of PBS. Other implementations with different designs and features are also being developed and explored. Overall, mev-boost represents a significant step towards realizing the potential benefits of PBS in Ethereum. However, continuous research and development are crucial to address the challenges and ensure a secure, decentralized, and efficient implementation. - -### Challenges and Solutions - -PBS presents several challenges, including potential security vulnerabilities and the risk of centralization. Ongoing research focuses on addressing these concerns through innovations such as enhanced PBS (ePBS), inclusion lists, and the Proposal Eligibility Proposals Committee (PEPC). diff --git a/docs/wiki/research/PBS/mev.md b/docs/wiki/research/PBS/mev.md index 2ba5e53a..3d642d73 100644 --- a/docs/wiki/research/PBS/mev.md +++ b/docs/wiki/research/PBS/mev.md @@ -1,4 +1,19 @@ -Maximal Extractable Value (MEV) refers to the profit miners or validators can earn by strategically ordering, including, or excluding transactions in a block. In Ethereum, MEV has gained greater attention as validators extract increasingly more value, especially in DeFi (Decentralized Finance) applications. This can lead to negative consequences, such as frontrunning, increased transaction fees, and unfair advantages for large-scale miners or validators. -Proposer-builder separation can change the dynamics of MEV extraction in that there could be a redistribution of MEV between the two roles, potentially changing the incentives and rewards associated with each. Since block builders are responsible for transaction ordering and inclusion, they may develop new strategies or promote increased competition that could result in more efficiency and fairer distribution of MEV across the network. +# Maximal Extractable Value (previously Miner Extractable Value) + +Maximal Extractable Value (MEV) refers to the the maximum value that can be extracted from block production beyond the standard block reward and gas fees by strategically ordering, including, or excluding transactions in a block. + +In Ethereum, MEV has gained greater attention as validators extract increasingly more value, especially in DeFi (Decentralized Finance) applications. This can lead to negative consequences, such as frontrunning, increased transaction fees, and unfair advantages for large-scale miners or validators. + +[Proposer-builder separation (PBS)](/wiki/research/PBS/pbs.md) can change the dynamics of MEV extraction in that there could be a redistribution of MEV between the two roles, potentially changing the incentives and rewards associated with each. Since block builders are responsible for transaction ordering and inclusion, they may develop new strategies or promote increased competition that could result in more efficiency and fairer distribution of MEV across the network. + +## Evolution of MEV + +Maximal Extractable Value (MEV) originated during the proof-of-work Era, where it was known as "Miner Extractable Value." This terminology reflected the miners' ability to influence transaction processes, including their inclusion, exclusion, and sequencing. Following Ethereum's transition to proof-of-stake with The Merge, validators have taken over these critical functions, rendering mining obsolete within the protocol. Despite these changes, the mechanisms for value extraction remain in place, leading to the adoption of the term "Maximal Extractable Value" to address these activities. + +Although MEV has been possible since the inception of Ethereum, it gained significant attention with the rise of DeFi and arbitrage tooling like Flashloans. In the early days, MEV opportunities were primarily seized by outbidding rivals in the public mempool, marking the era known as Priority Gas Auction or PGA. Details about this chaotic era is captured in [Flashboys 2.0](https://arxiv.org/abs/1904.05234). + +In the Post-Merge world, the concept of Miners ceased to exist. Validators were now the entities responsible to add blocks to the chain. Anticipating the changes after The Merge, Flashbots, alongwith the client teams and the Ethereum Foundation commenced the development of [mev-boost](/wiki/research/PBS/mev-boost.md). mev-boost is an out-of-protocol implementation of Proposer-builder Seperation. + +See the [Next Section](/wiki/research/PBS/pbs.md). diff --git a/docs/wiki/research/PBS/pbs.md b/docs/wiki/research/PBS/pbs.md index 274c1bf1..caaea8ba 100644 --- a/docs/wiki/research/PBS/pbs.md +++ b/docs/wiki/research/PBS/pbs.md @@ -145,4 +145,4 @@ Below are some further readings regarding PBS and related topics: - [Vitalik on pbs censorship](https://notes.ethereum.org/@vbuterin/pbs_censorship_resistance) - [Payload timeliness committee(PTC) design for ePBS](https://ethresear.ch/t/payload-timeliness-committee-ptc-an-epbs-design/16054) - [2-slot PBS](https://ethresear.ch/t/two-slot-proposer-builder-separation/10980) -- [Foward Inclusion Lists](https://notes.ethereum.org/@fradamt/forward-inclusion-lists) \ No newline at end of file +- [Foward Inclusion Lists](https://notes.ethereum.org/@fradamt/forward-inclusion-lists) diff --git a/docs/wiki/research/PBS/research.md b/docs/wiki/research/PBS/research.md deleted file mode 100644 index dcda736d..00000000 --- a/docs/wiki/research/PBS/research.md +++ /dev/null @@ -1,3 +0,0 @@ - - -# Challenges and Solutions