How Do Flashbots Aim to Mitigate the Negative Externalities of MEV?
Flashbots provides a private communication channel between searchers and block builders/validators, bypassing the public mempool. This mechanism aims to democratize MEV, prevent gas wars (where searchers outbid each other), and minimize network congestion.
By moving the MEV auction off-chain, it makes the process more transparent and efficient for the participants.
Glossar
Flashbots
Architecture ⎊ Flashbots represents a pioneering effort in protocol-level organization, initially focused on mitigating Miner Extractable Value (MEV) within the Ethereum ecosystem, and now expanding its scope to broader blockchain infrastructure.
Negative Externalities
Cost ⎊ Negative externalities in decentralized finance represent uncompensated costs imposed on market participants by the profitable actions of others, most notably through Maximal Extractable Value (MEV) extraction.
Private Communication Channel
Channel ⎊ A Private Communication Channel, such as those established by Flashbots, is a direct, non-public link used by searchers to transmit transaction bundles to block builders or validators, bypassing the transparent public mempool.