How Do ‘Flashbots’ Aim to Mitigate the Negative Externalities of MEV?
Flashbots is a research and development organization that created a system to move MEV extraction from the public mempool to a private communication channel between searchers (bots) and validators. This prevents front-running and sandwich attacks in the public domain.
It also offers a transparent, competitive auction for MEV, which directs the profits to validators instead of being lost to network congestion, reducing gas price volatility.
Glossar
Flashbots
Architecture ⎊ Flashbots operates as a research and development organization focused on mitigating the negative externalities inherent in public blockchain systems, particularly those related to Miner Extractable Value (MEV).
Private Transaction Relays
Relay ⎊ Private Transaction Relays (PTRs) represent a paradigm shift in cryptographic transaction routing, particularly relevant within decentralized finance (DeFi) and options trading ecosystems.
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.
Censorship Concerns
Risk ⎊ Censorship concerns represent the risk that transactions on a blockchain or decentralized finance (DeFi) platform can be blocked or selectively excluded from validation by network participants.