Flashbots

Flashbots is a research and development organization focused on mitigating the negative externalities of current MEV extraction techniques and avoiding the existential risks MEV could cause to state-rich blockchains like Ethereum.

Basics

• Started in:
• Based in:

History

• From Dose of DeFi (10-12-2022):

"At the beginning, Flashbots was seen as the hero of the MEV story. Prior to Flashbots, the Ethereum network was clogged with secret bots competing over profit opportunities for arbitrage, liquidations, and to front-run user orders. To ensure a profitable transaction was included in a block, these bots (now called searchers) would put higher and higher gas prices in so-called Priority-Gas Auctions (PGAs) that raised gas prices for all Ethereum users. Flashbots created a forked version of Geth (MEV-Geth) for miners to run that allowed miners to auction off blockspace to searchers – outside of the protocol – so they could include profitable transactions. Moving this off-chain created huge cost savings for all Ethereum users.

In the 20-plus months since MEV-Geth launched, Flashbots’ image has changed dramatically. No longer a scrappy warrior charging through the Dark Forest, it’s now seen as a centralizing force that has arguably enabled censorship on Ethereum. While Flashbots previously focused on shipping immediate solutions (warts and all), SUAVE is an attempt to build a comprehensive, decentralized solution to the MEV crisis once and for all."

Audits & Exploits

Exploits/Bugs

• Flashbots fixed a DoS in a relay module thanks to a responsible disclosure by Sambacha (15-11-2022).

Compliance

• From a list of projects that implements address checking, sanctions, TRM, etc (15-8-2022):

"Has OFAC blacklist"

On the same day, Flashbots announced it would hasten open-sourcing some of its code in response to the U.S. Treasury’s sanction of the Tornado Cash protocol last week. However, later that day someone pointed out that "there is apparently only a single Flashbots relayer from which the validator clients can get the built blocks, the code for which is currently closed source!"

• Flashbots block builder got open sourced (18-11-2022).

Projects

• From The Defiant (17-5-2021):

"They focus on building a variety of tools that help bring the power to analyze and extract MEV to everyone. By definition, MEV exists in places where there is high complexity which requires significant knowledge of smart contracts to understand. Flashbots work reducing this complexity by working on three fronts:

1. Provide tools to inspect and quantize the impact of MEV – This helps reduce the information asymmetry and people can understand the problem and its impact better. (MEV-Inspect)
2. Democratize the extraction of MEV – The power to extract MEV exists in the hands of few people so they provide tools for everyone to start extracting MEV. (MEV-Geth)
3. Distribute the benefit of MEV – Currently, the miners and validators extract a disproportionate amount of benefits. So it’s important to redistribute these to all the participants."

MEV-geth

• Software which can be run by miners to mitigate negative externalities of Ethereum MEV.

SUAVE

• From Dose of DeFi (10-12-2022):

"SUAVE is a new blockchain designed to be “the mempool and block builder for all blockchains”. Instead of connecting MEV activity through the Flashbots network, an entirely new EVM compatible blockchain will serve as the economic foundation for this marketplace.

Instead of Ethereum, Flashbots hopes that block building will occur through SUAVE, and not just for Ethereum, but for every blockchain. There are three core components of SUAVE:

1. Universal preference environment
2. Optimal execution market
3. Decentralized block building.

These are separate components that work together to achieve an optimal outcome for all parties."

Revenue

• From BlockCrunch (30-3-2023):

"$700M in revenue generated for validators and searchers, but none accrued to Flashbots."

Usage

• From Our Network (21-3-2021):

"Flashbots is an R&D organization working on mitigating the negative externalities of Ethereum MEV. Today 5 mining pools are running its MEV-geth software, which in total account for >12% of the Ethereum hashrate. Miners running MEV-geth have seen an average increase in income of 0.13 ETH per block so far in March, which is also a ~3x increase MoM. In total, miners collected 174 ETH in Flashbots fees in February, up by more than 6x the amount collected in January."

• From Dose of DeFi (13-4-2021):

"Like dangling food in front of starving people, Stephane posits that the relatively low gas prices may be because arb bots that normally compete in Priority Gas Auctions (PGA) and clog the network for all Ethereum users are instead directing their arb transactions directly to miners, or the 60% using Flashbots Geth. By sending the transaction directly to the miner, the arb bot does not need to set a high gas fee with hopes of getting selected in the mempool. Of course, arb bots are still paying the miners for prioritizing their transactions, but this happening off-chain, so it doesn’t raise prices for everyone else using Ethereum."

• From Our Network (1-5-2021):

"Since launching in January of this year, Flashbots’ MEV-geth client has seen rapid adoption. Today mining pools totaling more than 80% of Ethereum’s hashrate are running MEV-geth. To date, miners have earned $24m in ETH by including transactions sent via Flashbots. Over $22m of this income occurred in April alone. This is additional income (taking into account opportunity costs), with miners earning an additional 5% on average in revenue per block with Flashbots transactions."

Competition

• From Dose of DeFi (10-12-2022):

"There are a lot of similarities between CoW Protocol and what Flashbots are proposing with SUAVE. CoW is focused on “trading intent expression” while SUAVE intends to capture “generalized intent expression”. This is a fancy way of saying, “What do you want to buy or sell and for how much?” The protocol will then auction off this intent to either solvers (CoW) or builders (SUAVE). The key difference is that SUAVE is designed to extract most of its value from transaction ordering, whereas with CoW, trade order doesn’t matter because all tokens have the same price within a block. The other key difference is that SUAVE is intended as a single place to submit orders for multiple blockchains, though CoW may also move in this direction.

If you squint, SUAVE also touches on similar themes to Chainlink’s Fair Sequencing Service (FSS). FSS was designed for L2 sequencers, and not for block building, but both SUAVE and FSS are trying to build a decentralized network for activity that benefits enormously from scale. The other big difference, of course, is that block builders in SUAVE are trying to maximize MEV, whereas Chainlink node operators are trying to achieve the right order based on order submission times."

• On the difference with MiningDAO, from their introduction (18-5-2021):

"MiningDAO is the first protocol to offer truly private transactions that do not rely on an honesty assumptions by miners. The protocol can work end-to-end without revealing any of the transactions to miners, up until the point a block is mined. Further, our block auction is open-bid, which is substantially more convenient for arbitrageurs: they know in advance whether they’re winning and can always bid up, instead of having to build complicated pricing models based on past history."

Team, Funding, Partners

• Phil Daian; member
• Hasu; lead strategy (5-1-2022).
• Stephane Gosselin; ex-co-founder; From Unchained (10-10-2022): "[he] announced on Twitter he stepped down from the company. Gosselin said he was leaving Flashbots due to “disagreements with his team.” Even though he didn’t say it plainly, he implied these disagreements concerned the fact that Flashbots has decided to comply with the US Treasury sanctions, which spiked censorship concerns across the Ethereum community."