MEV: Implementation Principles within BSC (For Discussion Purpose)
Abstract:
This document proposes and elucidates a set of principles and guidelines for engaging in Maximal Extractable Value (MEV) operations within the BNB Smart Chain (BSC) Network. It intends to ensure that such actions do not compromise the user experience or manipulate users for value extraction. We address specific practices such as transaction prioritization, emphasizing the balance needed between fairness and efficiency between users and the BNB Ecosystem.
Introduction:
MEV denotes an advanced concept within blockchain systems-- especially EVM Chain – representing the total value that validators can derive by strategically manipulating transactions within a block they are producing. As MEV gains more traction, it is essential to set clear guidelines within the BNB Chain ecosystem. This helps to protect the network and its users from undue manipulation while maintaining a strong and reliable infrastructure.
Example: Let’s consider a scenario where a validator intentionally reorders transactions within a block to profit from arbitrage opportunities. Such activity requires some guidelines to prevent the ecosystem being susceptible to manipulation.
Transaction Prioritization:
This involves users providing incentives to BSC validators to handle their transactions preferentially. This disrupts the blockchain’s ideals of transparency and fairness, leading to an impact in transaction processing and creating an environment prone to “manipulation” and “centralization”. MEV implementation should maintain as much as possible of the core blockchain principles of decentralization, transparency and equality.
MEV: Principles and Guidelines
1.1. User-Focused Approach:
A well-designed MEV strategy must always prioritize user experience and integrity, ensuring no negative impacts result from MEV practices. This involves preserving transactional efficiency, maintaining reasonable gas prices, and protecting users from front-running and similar predatory practices.
Example: An MEV strategy that prioritizes large transactions and disregards smaller ones could result in increased gas prices and delayed transactions for regular users. An effective approach ensures transactional efficiency is maintained for all users, regardless of transaction size.
1.2. Transparency:
Every MEV implementation should foster an environment of trust through transparency.permitting users to understand the process and implications fully.
Example: Validators who manipulate block content for personal gain break trust. Hence, transparency is critical to fostering a trustworthy environment.
1.3. Fairness and Equality:
To align with the decentralization principle of blockchain, effective MEV practices should ensure fairness and give equal opportunities to all participants, irrespective of their stake.
Example: A system where certain transactions are consistently prioritized over others, based on the stake of the user, compromises fairness. MEV strategies should avoid such bias, ensuring all participants, regardless of their stake, have equal opportunities.
1.4. BSC Network Adaptability:
Compared to Ethereum, the BSC has a shorter blocking time (3 seconds) and a larger capacity (140MM gas ceiling). Directly applying Ethereum’s MEV solution on the BSC network may pose challenges to its performance and block stability. Therefore, it is essential to fully consider the unique characteristics of the BSC network when proposing new solutions.
Example: An MEV solution that assumes a block time similar to Ethereum’s might struggle with BSC’s shorter block time. This compromises performance and block stability, therefore MEV solutions should be tailored to BSC’s unique features.
1.5 Network Security:
The MEV solutions often have certain security assumptions and require direct access to validator nodes through third-party services. These security assumptions and network security issues need to be fully discussed.
Example: Some MEV solutions might require direct access to validator nodes via third-party services which could create potential security vulnerabilities. Any MEV solution should fully discuss and address such issues, ensuring a secure network topology.
1.6. Decentralization and Diversity:
MEV strategies should promote decentralization to prevent the centralization of power and prevent the risk of single points of failure.
Example: Consider a scenario where one block builder becomes dominant and imposes unfair transaction ordering to maximize their MEV extraction. This would be harmful to the fairness and transparency of the network. To prevent this, it’s essential to encourage a diverse array of MEV providers. One strategy could be implementing a rotational system for block proposers or a randomized system that selects builders for block construction. This ensures that no single entity has excessive influence over block formation and MEV extraction.
1.7. Collaboration and Innovation:
Continuous research and innovation should be encouraged to address MEV-related challenges. For instance, collaboration between different stakeholders can lead to innovative solutions.
Example: Developers from different blockchain projects could work together on open-source projects to create tools that increase the transparency of MEV activities, or researchers from academic institutions could publish studies on the impact of MEV and propose mitigation strategies. Innovation could also come in new algorithms for fairer transaction ordering or sophisticated strategies for protecting validator nodes from potential security threats.
Closing points:
The principles and guidelines presented in this document are designed to address the various challenges and considerations associated with implementing Maximal Extractable Value (MEV) within the BSC network. By prioritizing good practices and user-centric approaches and continuously promoting transparency, security, decentralization, diversity, collaboration, and innovation, we believe that the potential for MEV can be harnessed in a way that aligns with the core values of the BSC network and the broader blockchain community.
However, it is essential to recognize the landscape of blockchain technology, especially MEV, which is rapidly evolving and inherently complex. Though comprehensive, the strategies, issues, and examples cited herein are not exhaustive. This post is open to continual refinement and expansion in response to new developments and insights in the field.
We aim to keep this document relevant and timely, incorporating new findings, feedback, and network parameters or technology changes. We can ensure a stable and adaptive approach to MEV within the BSC network by maintaining our commitment to transparency, security, and decentralization. Together, we can shape an MEV implementation that benefits the network and its users.
