Ethereum MEV techniques (front-running, back-running, arbitrage, sandwich and liquidations) after the Ethereum Proof-of-Stake merge.
We did a quick poll between r/ethdev community on Reddit with a question:
The point was to get a yes/no answer — stay or disappear? And every option with two variants to find arguments for it. Plus a bonus option.
14k views, 226 votes, 12 comments, and 170 upvotes. Thank you for your participation.
Now, first, we want to comment on the bonus option: “no idea, just show me results”. 40% voted for it. It’s a high number. We can tell there is a significant number of Ethereum devs who do not know exactly what will happen. Plus, are interested to find out more.
Only 4% of all responders (or 7% if we speak about the yes/no option) think MEV techniques will disappear. Half of them because it’s not possible and the second half because it will not be that profitable. We can confirm the fact, that MEV techniques will be hereafter PoS. Or just a very few people believe it will not.
56% of responders (or 93% in the yes/no calculation) are sure MEV techniques will stay and what is more important, the vast majority think it will be a boom for them.
Why the booming
ZMOK agrees with the “Stay and booming” option. There are several points why it’s the most likely option:
1. Public vs. private mempools
The discussion starts with using private RPC and private Builders.
Most transactions are sent to public mempools. User u/magnetichira mentioned, could be solved by private mempools (using Flashbots for example)
And it has brought two immediate answers:
We must agree, that using private RPC eliminates chances for other participants to do MEV techniques over public mempool. But, transactions sent directly to the Flashbots Builder will need to attract Validators that much, so that they will accept their transactions. That increases the chances of waiting too long or chances of failed transactions. Will this motivate millions of standard users to jump on a train of private MEV agreements? Maybe, but probably not. So will MEV stay? Yes.
Now, when you think about doing an arbitrage, you must calculate by using a much higher gas to front-run others. So to be profitable, you must calculate the potential profit of doing arbitrage, minus gas fees. As transaction fees after merging are expected to decline, this mathematics changes, so every transaction is becoming an opportunity. Today, bots are ignoring small transactions, because gas fees will consume potential profit for sure. After the merge, almost every transaction is an opportunity. The boom of small amounts arbitrages is expected for sure.
3. Miners can play the role. Again.
Why do we even mention miners? It’s over, right? Well, let’s not forget that miners are nodes. Very powerful nodes. Now are set to mine, but after the merge, it’s the owners’ decision how to benefit from owning them. This powerful hardware, together with people who (most probably) understand a topic, will start to find a new job, that can be node providers, validators, or block builders. And so to play the role again.
Today’s miners have two options. To mine another PoW blockchain or to transform themselves into mentioned above. We saw in the past years that users are willing to pay high gas fees just to keep being on Ethereum. Now, when new actors are coming, it can attract so many solutions and users, running on other blockchains, to run on Ethereum, that the overall activity is designed to skyrocket. And together with it, the MEV techniques too.
We can not tell 100% what will happen, but after this poll, as the majority of people are expecting a boom, we are more sure it will happen too. To get ready for that, we make sure our ‘Global TX Mempool’ centralises as many queued and pending transactions in real-time as possible to enable you to pick the best ones for Builders. And sending transactions via the Front-running endpoint delivers to as many Builders/Validators as possible.