Ethereum Co-founder Vitalik Buterin Proposes Solutions to Combat Miner Extracted Value Issue
Summary:
Ethereum co-founder, Vitalik Buterin, has proposed solutions to tackle the miner extracted value (MEV) issue which is affecting the Ethereum blockchain. MEV is a practice where block producers arrange transactions within a block to maximize profits, causing network congestion and escalating gas fees. Buterin suggested addressing the issue using a combination of minimization and quarantine techniques, inclusion lists, and lowering the requirements to run a node, with the goal of keeping Ethereum decentralized and democratic.
Ethereum's co-founder, Vitalik Buterin, presented an innovative approach to address Ethereum's miner extracted value (MEV) issue, on May 17th. MEV refers to a tactic in which block producers employ complex market strategies to organize transactions within a block and enhance profits. Buterin illustrated this with an example involving decentralized exchanges such as Uniswap. If the USD/ETH exchange rate on these platforms is $3000 just before the next block is processed, and the rate on centralized exchanges rises to $3005 after Ethereum releases the next block, the person handling the next block can tactically purchase Ether (ETH) at a lower cost in the first transaction, and sell it at a higher rate on centralized exchanges. Although MEV provides profitable returns for validators, it results in bottlenecks in the network, increases Ethereum blockchain's gas fees, and heightens traders' slippage. Essentially, MEV is an implicit tax on those conducting transactions across the network. Furthermore, MEV could undermine confidence in the consensus protocol and erode the network's overall trustworthiness. Geth's core developer, Péter Szilágyi, criticized this asset arbitrage strategy, arguing that the Ethereum network was promoting such strategies by embracing MEV developers instead of halting the practice outright. This criticism caught Buterin’s attention, who suggested several potential solutions to the issue. Buterin stated that the traditional way of handling the MEV problem combines MEV minimization and MEV quarantine tactics. MEV minimization means creating alternatives to exchanges like Uniswap and implementing measures at the protocol level to limit the information available to MEV developers. Yet, while these minimization techniques are robust, they are complicated and expensive to implement. Quarantining, on the other hand, involves separating the validation process from the block's content by leaving block content selection to designated builders. This concept, called proposal/builder separation (PBS), can work, but it carries the risk of greater centralization, as chosen builders can arbitrarily exclude transactions. As a solution, Buterin proposed the use of inclusion lists to prevent builders from excluding transactions. These lists grant builders the right to organize transactions, but they also mandate that every transaction received should be included in each block proposal. Buterin concluded that the solution to the MEV problem will likely involve a combination of minimization, quarantine strategies, and inclusion lists, along with lowering the prerequisites for running a node, thus maintaining Ethereum's democratic and decentralized nature.
Published At
5/21/2024 9:00:00 PM
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