Important points
- Fossil improves transaction inclusion guarantees by allowing validators to force transactions to be included in Ethereum blocks.
- Fossil’s design aims to prevent MEV from compromising censorship resistance.
- MEV introduces centralization among validators and challenges decentralization.
- Block construction on Ethereum is currently dominated by a small number of builders, undermining decentralization.
- MEV refers to the context in which transactions are placed in blocks and affects the order of transactions.
- The value that can be extracted from MEV dwarfs the transactions themselves, which were previously estimated to be about 1% of transaction volume.
- Building a block involves a searcher creating a transaction bundle and a builder compiling the transaction bundle into a complete block.
- The auction process between proposers and builders is mediated by relays to ensure fair transactions.
- The commit and publish scheme will replace the current relay system in the next Ethereum hard fork.
- Proposers have significant power in the auction process and capture value before redistribution.
- The Ethereum Foundation is focused on strengthening censorship resistance and transaction inclusion.
- Future changes in Ethereum’s infrastructure may impact transaction processing dynamics.
Guest introduction
Thomas Thiery is a researcher in the Robust Incentives Group at the Ethereum Foundation, focusing on blockchain economics and protocol design. He is the primary architect of FOCIL (Fork-Choice Enforced Inclusion Lists). This is a mechanism proposed for inclusion in Ethereum’s Hegota upgrade that addresses the risk of centralization in block generation by allowing decentralized validators to enforce transaction inclusion. His work directly addresses the challenge of censorship resistance posed by the concentration of block-building power among a small number of actors.
Fossil’s role in Ethereum
- Fossil strengthens inclusion guarantees for public transactions by allowing validators to enforce transaction inclusion.
I think fossils can help significantly improve inclusion guarantees in public transactions
— Thomas Thierry
- This mechanism allows multiple validators to force include lists into an Ethereum block.
- Fossil’s design prevents MEV from compromising censorship resistance.
There was also a very meaningful intention to not involve MEV in the design of Fossil.
— Thomas Thierry
- This approach ensures that MEV transactions do not eliminate censorship resistance.
- Understanding the impact of Fossil requires knowledge of Ethereum’s transaction validation process.
- The focus is on preserving the decentralized spirit of Ethereum.
Impact of MEV on decentralization
- MEV brings significant focus among validators.
There was the MEV, and there was a huge concentration that was basically driven by the MEV.
— Thomas Thierry
- Validators that were previously decentralized may be centralized by MEV.
- The current state of block construction is dominated by a small number of builders.
Builders were actually very centralized… now we have a very dominant builder
— Thomas Thierry
- This centralization undermines the decentralization of the Ethereum network.
- It is important to be aware of the current status of block builders.
- MEV challenges the health of Ethereum’s decentralization.
Understand MEV
- MEV refers to the context in which transactions are placed on Ethereum blocks.
High-level MEV is just the context in which transactions are placed on the Ethereum block
— Thomas Thierry
- This affects the order and possibility of creating new transactions.
- The values that can be extracted from MEV dwarf the transaction itself.
This extractable value trivializes the transaction itself
— Thomas Thierry
- Previously, MEV was estimated to be around 1% of trading volume.
- Understanding the order of transactions is key to understanding the impact of MEV.
- MEV has a significant economic impact on Ethereum transactions.
Dynamics of block construction
- Block construction on Ethereum involves both searchers and builders.
There are builders who are also searchers
— Thomas Thierry
- Searchers create valuable transaction bundles that builders can compile.
- Builders require advanced technology to build blocks quickly.
- Builders compete in auctions to build complete blocks.
- The difference between a searcher and a builder lies in the construction of blocks.
- It’s important to understand the roles of searchers and builders.
- This process is central to how transactions are processed on Ethereum.
Auction process on Ethereum
- The auction process between the proposer and the constructor is mediated by a relay.
Auction is currently mediated by Relay
— Thomas Thierry
- Relays ensure fair interaction between proposers and builders.
- This mechanism prevents proposers from abusing the builder.
- The current relay system will be replaced with a commit and publish scheme.
There is no need to use trusted relays like that
— Thomas Thierry
- The new scheme allows for trustless communication between proponents and builders.
- Knowledge about Ethereum’s upcoming hard fork is essential.
Proposer’s role
- Proposers have great power in the auction process.
Most of the value actually goes to the proposer
— Thomas Thierry
- The proposer captures the value before it is redistributed.
- Their role is to propose blocks to the rest of the network.
- The proponent’s influence on value capture is significant.
- Understanding the dynamics of an auction is important to grasping the power of proposers.
- The proposer is the main actor in the value distribution process.
- The auction process highlights the importance of proposers in Ethereum.
Ethereum’s future infrastructure
- The Ethereum Foundation is focused on increasing censorship resistance.
- Transactional inclusion is a key issue addressed by the Foundation.
- Future changes in Ethereum’s infrastructure may impact transaction processing.
- The commit and reveal scheme enhances trustless communication.
- The focus is on maintaining the decentralized spirit of Ethereum.
- Understanding these changes is critical for network stakeholders.
- The Foundation’s work addresses the critical challenges posed by MEV.
- The future of Ethereum’s governance is an important discussion point.
Challenges in the Ethereum ecosystem
- MEV poses significant challenges to the decentralization of Ethereum.
- Centralization of block builders compromises the health of the network.
- The power of proposers in the auction process has raised concerns.
- The Ethereum Foundation will address these challenges through infrastructure changes.
- Understanding the impact of MEV is critical for stakeholders.
- The focus is on maintaining a decentralized network.
- The Foundation’s work is critical to addressing these challenges.
- The future of the Ethereum ecosystem will be shaped by these dynamics.
