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Maximal Extractable Value (MEV) has been gaining a lot of attention in the past two years. With Ethereum's transition from proof-of-work (PoW) to proof-of-stake (PoS), clients like MEV-boost have become the standard to address MEV in the Ethereum blockchain. Yet, despite its goals, MEV-boost has proven to be ineffective in preventing further centralization of the blockchain ecosystem.
Towards the end of last year, the Flashbots team proposed a new architecture called Single Unifying Auctions for Value Expression (SUAVE). This architecture aims to address some of the most significant issues in the MEV space, which many users, builders, and founders are concerned about. Let's examine this newly proposed architecture, starting from the very beginning — the concept of MEV itself.
The term "Miner Extractable Value" (MEV) was coined in 2019 by blockchain expert Phil Daian to refer to the total amount of ETH miners can extract by manipulating transactions. Originally used in the context of proof-of-work consensus mechanisms, the term was updated to "Maximal Extractable Value" when Ethereum's blockchain shifted to proof-of-stake during the Merge in 2022.
When a transaction is being made, it enters a waiting area called the mempool (short for memory pool). This area is publicly visible and contains all the pending transactions waiting for validation. Miners or validators (depending on the specific consensus mechanism used in each blockchain) select and order the transactions from the mempool to create a block.
Since validators can choose the order in which transactions are processed, they can manipulate it to their advantage. That is why some people also refer to MEV as the invisible tax. According to Flashbots, a research and development organization, over $600 million has been extracted from transaction reordering on Ethereum since the beginning of 2020. However, the amount could be even higher.
MEV is currently associated with several critical issues in the blockchain ecosystem. One of the main concerns is the varying degrees of centralization caused by various tools and strategies targeting MEV. For instance, a prior solution that outsourced block-building work called MEV-Boost happened to indirectly powered centralization instead.
MEV-Boost is an open-source software created by Flashbots for the PoS Ethereum validators. It allows them to outsource block production to so-called builders. By separating the roles of proposers and block builders, Ethereum should theoretically benefit from greater competition, decentralization, and censorship resistance.
Unfortunately, MEV-Boost did not live up to expectations, as the block-building role was gradually consolidated among big players, leading to the centralization of MEV and thus posing a threat to one of the most central principles of blockchain — decentralization.
Moreover, the centralization of MEV and the creation of different MEV frameworks for different blockchains lead to a fragmented and non-interoperable ecosystem. The current concentration of MEV on Ethereum has limited its compatibility with other chains even more, resulting in a lack of cross-chain flexibility. Consequently, it obstructed users from taking advantage of the current cross-chain MEV opportunities.
Therefore, it is crucial to find a solution that can provide better interoperability and decentralization to ensure the blockchain ecosystem keeps evolving without departing from its main principles and the blockchain community can have more opportunities. It is where SUAVE can help.
SUAVE is an independent network that is designed to operate as a universal sequencing layer for different blockchains, enabling cross-chain MEV. As it creates a universal plug-and-play mempool and block builder that does not depend on any particular chain, SUAVE encourages the blockchain ecosystem's users and participants to promote interoperability and flexibility.
To understand the SUAVE concept better, let's take a closer look at the first two words in the SUAVE abbreviation: single and unifying. The Flashbots team created SUAVE to provide a unified auction platform where various types of value expressions can be auctioned. Its mechanism allows different market participants to express and exchange value on the same platform, making the auction process more efficient and streamlined. Therefore, SUAVE has the potential to become a versatile and inclusive platform that can be used for traditional auctions, emerging cryptocurrency markets, and, naturally, the MEV market.
SUAVE is an innovative system that consists of three main components: Universal Preference Environment, Optimal Execution Market, and Decentralized Block Building.
The Universal Preference Environment is a specialized chain and mempool that allows all participants to showcase their preferences or see them in a single place. Such an approach makes the process more efficient and streamlined since all preferences can be accessed and executed from one central location.
The Optimal Execution Market is a network of specialized parties known as executors. These executors watch the mempool and compete with each other to execute one or another preference. Due to competition, executors are motivated to provide users with the most advantageous conditions for their preferences, increasing the quality of user experience.
The Decentralized Block Building is a decentralized network of block builders who can access the encrypted preferences from users and merge them into blocks. The SUAVE's universal mempool model allows searchers and builders from around the world to collaborate on building blocks, thus creating a more diverse environment and ensuring that blocks are built as efficiently and effectively as possible.
SUAVE is a platform that revolves around the concept of preferences. These preferences are messages signed by users to express their specific goals and unlock payment once the predefined conditions are met. Preferences can have varying levels of complexity, ranging from swaps within a single chain to complex sequences of events across multiple blockchains, such as arbitrage trading. In simple terms, preferences can be seen as SUAVE's native transaction type, with a multitude of applications.
SUAVE has been designed to improve coordination and composability among transactions. Its structure allows for more flexibility and efficiency in executing transactions on networks. SUAVE follows a workflow including several essential steps: transaction pre-processing, ordering, execution, and result verification.
While processing transactions, SUAVE analyzes smart contract code and relationships between transactions to identify relevant characteristics and dependencies that help to establish a more beneficial transaction ordering. This step brings many possibilities to executors, block builders, validators, and users, as pre-processing allows for more cost-efficiency. For example, executors can batch similar transactions together, decreasing gas payments for users. With more preferences aggregated in one place, blocks can be optimized better for the benefit of all users.
Block builders and validators also benefit from the unified auction as it allows them to see cross-domain preferences and successfully coordinate with other builders on other domains.
Next, SUAVE optimizes the transaction execution order to maximize efficiency and composability based on the pre-processing insights. This strategic scheduling minimizes redundant computations and conflicts, optimizing overall transaction processing.
After transaction ordering, SUAVE executes the transactions in the determined order and verifies the outcome’s correctness and validity by ensuring that each transaction is completed as intended without any errors.
Lastly, SUAVE returns the results to the relevant participants. Because of thorough transaction ordering and result verification, SUAVE ensures efficient and accurate execution.
SUAVE is a cutting-edge technology that offers several advantages and potential applications. Firstly, it enhances transaction processing efficiency by optimizing the order of execution of transactions and minimizing any possible redundancy and conflicts. Such an advantage can be particularly useful in cases when heavy transaction processing is required, for example, on decentralized exchanges or other DeFi platforms with a big load of transactions.
Secondly, structured transaction processing can provide more transparency and fairness to the market, reducing unfair behavior and the number of manipulation opportunities for leading MEV players.
Another advantage of SUAVE is the predictability of transaction execution. It enables developers to control and plan the execution flow of their smart contracts better, thus promoting safer, more reliable, and confident application deployment. Consequently, it can positively affect the DeFi market, fostering a more diverse dApps landscape in the future.
Lastly, apart from the builder-related benefits mentioned before, SUAVE can help maximize validators’ revenue and enable private transactions with the best execution and minimum possible fees for users.
If SUAVE successfully meets its objectives, it will provide a unified auction platform that will centralize the marketplace for various forms of value expression. As a result, it will facilitate the flow and exchange of different values, increasing overall market efficiency and liquidity.
The launch of SUAVE brings new opportunities and challenges for Ethereum's development and application. However, it is equally exciting for other blockchains. By offering a more efficient, democratic, composable, and predictable approach to transaction processing, SUAVE certainly has the potential to drive innovation and growth across the whole blockchain industry as time progresses. Moreover, it can help the blockchain ecosystem fight against centralization, a cause close to the heart of many crypto enthusiasts.
Sharing the same sequencing layer (SUAVE) allows block builders to engage in cross-domain MEV, validators to increase their profits, and users to have more favorable conditions, all while advancing and maintaining the decentralization of blockchains.
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