 Looks like it does. Great. Hey everyone, good afternoon. I'm Alex Stokes, a researcher at the Ethereum Foundation. And yeah, you know, the title here says Block Building After the Merge. There's like a subtitle, which is MEV Moving Forward. You'll see in a bit, I have another kind of variant of this talk that looks at more, I'd say like the technical side of things. And I hope today to kind of communicate like a sense of the landscape around this topic and like MEV is like the obvious, you know, buzz phrase here. But yeah, so let's dig into what that means. And hopefully by the end, you'll have a sense of, again, yeah, like the landscape and what some of the concerns might be moving forward. So I've kind of always said that putting currency into crypto, like cryptocurrency is like this double-edged sword, because like, yes, you know, there's like this like speculative aspect that draws a lot of attention, a lot of talent, a lot of capital to the space. And that's great. But in the same, you know, sort of in the same breath, that also means that we're kind of directly programming with incentives here. We have this sandbox for, you know, playing with these different crypto-economic games. And I guess hopefully you'll see as we move forward that, you know, this could perhaps backfire. It could be the case that short-term incentives that are supported by protocols like Ethereum are perhaps too great for us to sort of resist. And in the context here, this is an important point. I say secure block space will be a premier commodity of this century. So maybe that's like a bit of a forward-looking projection and maybe you don't quite buy it. That seems to be, to me, the direction things are going. I call it secure here out in italics because some people say, oh, you know, you could just make a new L1. There's like as much block space as you need. But I will claim that, you know, there's different qualities of block space. Some is much more secure than others. So we have this thing. And if there's this thing called block space and it is actually so important, it's gonna be very valuable. And because it's so valuable, we should expect battles for control over block space. So this is like, if anything, the takeaway points. I'll just get it out of the way. And when I say this, I want you to think about like, you know, influences both inside the community and outside the community. There's going to be all sorts of people who are going to like try to attempt to co-opt Ethereum. And you know, that can happen in very overt ways. It can also happen in very sort of subtle ways. So just keep this in mind. I think when we think about any of this stuff around the protocol, what it looks like, how the protocol changes, things around the protocol like MEV and like a whole separate talk in this vein is like staking pools. But when you think about this stuff, just have an adversarial mindset and just, yeah, be careful out there. Okay, so I use this word block space. Maybe some of you have never heard of it. So what I really mean is just the stuff that goes into the blockchain. So today that's like transactions. If you've ever used Ethereum or like MetaMask, you've done this, you like have this transaction and maybe you sign it. Maybe there's some error. Maybe there's not enough gas. Maybe you didn't pay enough for the gas. Like a lot of things that happen. But you're probably familiar with this notion of a transaction. And so, you know, in the very sort of naive model, we have a bunch of transactions that get packed into blocks and these blocks go on chain, so to speak, which means they're like accepted as canonical or, you know, part of the consensus. And then somehow this like moves the state of things forward. I have this like sort of elusive comment to say tomorrow you'll see in a bit that this notion of builders I'm gonna sort of present today unlocks a lot of sort of abstraction and flexibility around how we use the protocol and how we like access these resources. And yeah, so maybe in the future, it looks a lot more general than just like the transaction you get through MetaMask. But so concretely like transactions are, you know, like the takeaway here is that transactions are a way to interface with the protocol's resources. And like what we really mean when we say that is like the state. Like the fact that Ethereum is organized as a blockchain today is like kind of a detail. It's like an engineering detail most like the important thing that we all care about is the fact that there's this like shared global state. For example, the account balance is everyone in the protocol, the state of smart contracts of Uniswap, of Aave, of Maker, and, you know, everything else, there's a lot these days. And the state is like the thing that, you know, is sort of the actual valuable thing and you need block space to access the state. And this is what everyone, you know, I claim will be battling for control over. And it turns out that, you know, because block space, at least on Ethereum, is so valuable, you know, it supports this ability to specialize. So what I mean when I say specialize is that we're seeing the emergence of this role within the protocol called a builder. And yeah, it's just this entity that says, okay, like rather than just like run a very naive algorithm for like getting these transactions into the block, which then goes on chain, you can do like far more sophisticated things. And if you're familiar with any of this MEV stuff, this is like one example. And yeah, it's like, I really think kind of the sky is the limit in terms of like the ingenuity people will bring to doing this task. And the takeaway here is that, you know, builders specialize in refining block space. So a hopeful analogy that I've come across is like thinking of, you know, we have like, actually I think this, yeah. So a helpful analogy here is like, and now it's lead to like mining some resource like say copper ore, you have copper ore, you can like dig it out of the ground, you just have this like thing, you have to like get the copper from the rock and this whole process of extraction to get to say like refined copper, this copper bar in the middle here. And then that can be further refined into, you know, say copper coins or pick your thing. So this is just like a generic notion of like taking some raw asset, some raw commodity and refining it to do like a series of phases. And in each phase, it's sort of like, it's more valuable than the phase before. So like for example, if I just like walked up to you and give you like a hunk of copper ore, you'd be like, okay, cool, but I don't really care. Whereas like if I walked up and handed you bunch of coins, you might care a lot more. So this is what I mean when I say that, you know, there's this sort of raw asset or this raw commodity is probably the right term of block space. And again, what we're seeing is this notion of a builder in the protocol or at least, you know, around the protocol that takes block space and sort of provides these like value added services or almost goods. You can think of them as to go from a less valuable thing to like a more valuable thing. And that's the job of the builder. So now the question is, well, okay, yeah, what are some examples of things they can do? And there's actually a lot. So here's like a list of things. There's a long list of things. Again, this is where I think all the ingenuity and creativity will come in that I think is really exciting around this space. And I'll just run through some of these examples here, right? So like one of them is like sponsored transactions. This is something people have wanted for like a very, very long time. And the idea is that basically you have this builder and they pay for the gas. So kind of concretely, what that looks like is, you know, I have my transaction rather than making like a direct Ethereum transaction. I make some intent, some message, something that builder knows how to like interpret in their own way. They still have the same effect on chain, but then they can be responsible for paying the gas and like end protocol. Another thing they could do, instant confirmations. So this is again, something if you've like, you know, going back to a metamask example, you might have seen where you sit in transaction and you have to sit and wait. And it's like, is it on chain yet? Like what's going on? Like sometimes, especially when there's like volatility and like the gas market and things, like it can be very unclear what's happening. You can like end up waiting a very long time. And that's not fun. But there's this almost service or abstraction a builder can provide, which is just to say, okay, you want this transaction to be in this block and I can basically as a builder say, I promise you this will happen, trust me, and there's a whole design space around, you know, changing what trust me means. But basically I can give you those promises of builder to get into that block. And in that sense, then I can turn around and really say, yes, you're in the block. Related thing, cancellations, retries. So the notion here is just saying like, yeah, let's say I make a transaction and I'm like, oh wait, like the market just moved against my unit swap trade. I'd rather just take it back. If you're just sort of sending raw Ethereum transactions today, that's really hard to do because you like gossip them through this global mempool and you have to like, yeah, it's tricky. One way people kind of game this today is they will send a duplicate transaction or one that will override the previous one that has different effects. But again, that's like an efficient and you can imagine there's like this layer around the protocol that handles this for you. And like in the same bucket, there's like retries. So like, let's say I want to like, I don't know, do a token transfer and for some reason it fails just because of like conditions on chain. So then I want to keep doing this, you know, until it goes through. And rather than me have to sit and do this, like a builder could do it for me. Next one, gas futures. So here the way to think about it is that a rather than selling you sort of like block space right now as a builder, I could sell you a block space in the future. That's a pretty cool idea. And one reason you might want to do this is because, you know, as part of this like contract that we enter into, you're also selling me at a certain price. So even if like the gas market moves against me, I still locked in a price that's nice to me. And builders could do this. I mean, there's other ways to do this on chain with like looking at the base fee and stuff. But yeah, so just to give you a flavor again of what builders could do, sell futures around block space. This was an idea I heard from Hasu. You could basically also sell block space in the past. And I won't go into too much detail here because basically what this means is like selling reorgs, which is probably something we shouldn't dig into too much. There's like some, I'd say moral hazards around it, but the symmetry between selling block space in the future and the past is like, I think too nice to pass up. Another one is just like this whole bucket of account abstraction. You might have heard of EIP 4337. And basically, again, it's just this way to like add more flexibility around the core protocol so that people have more, again, flexibility and how they use it. A simple thing would just be like a different signature scheme than ECDSA. And then this last bucket, MEV, I'm sure you guys have heard about this a ton this week. And if you think about extraction as like the service a builder could add, or well, there's a couple different things. But if you think of extraction, then there's like this whole bucket of, we can kind of just shove MEV into this whole notion of like a builder providing the service to users whether it's searchers or someone else. And so then I have a few examples within sort of that subspace. MEV extraction, which is what you usually think of when like a searcher's running some ARB. MEV smoothing, the notion here is basically, MEV is very spiky. And so instead of what we could imagine is somehow capturing it within the protocol and smoothing it out over time. And it's paid out to builders, to proposers, however that looks. That'd be pretty cool. And you could imagine off-chain constructions that do this that builders offer. Our last one is like maybe protection or rebates. And the notion here is like builders kind of would have this direct pipeline to the protocol and they could say, hey, I promise to keep your transaction private so it can be, for example, front run. So there's a lot they can do is the point. And again, there's a bunch more. There's okay. And then like even looking a little further forward, I'll just touch on this. So these are like, you know, this list here I think is like pretty concrete things you could do today. And I do think this is painting a picture of this builder as this like generalization that we'll continue to see in the protocol. For example, you could have rather than transaction level of 1559 you could do the block level. So today when you like send a transaction, you have basically have to like have some amount of ETH that you burn. But if you think about it, it can also the same if the builder of the block burns the same amount of ETH across all transactions at the end. And the reason you want this is because again, there's like better UX for users. They don't necessarily need to have ETH. And yeah, again, this is the generalization of like the protocol providing resources and then the user consuming them. And then a similar thing is rollups consuming blobs and 4044. So you might not know about the CIP, but basically the idea is we're gonna add a bunch of like data space to the protocol for users like rollups. And again, it's like we don't want rollups to have to necessarily like sit and like manage blobs and forget when they get on chain and things like this. And so you can imagine there's a builder or some sort of abstraction like a builder that manages getting blobs from rollups or from sequencers of these rollups onto the chain. Here's another talk, I'll just quickly point out where the one I mentioned previously where I went into a lot more of these use cases in depth. You could welcome to check it out. So this sounds cool. You know, I am claiming there's this builder thing and it gives you all this functionality and that's great. But what's the catch? I mean, there's probably a catch. And the catch is that the specialization actually implies validator centralization. And this is bad because it kind of harms like the whole health of Ethereum. Like the reason we care about Ethereum is because of this decentralization of the consensus, right, of the protocol and builder specialization harms us directly. So let's look at why. And why is that, you know, this process has economies of scale. So right now the like builder protocol or sorry, the builder role in the protocol is tied to the validator role. And because of that, you could have builders that do their things. You'll have entities that sort of have validators they partner with to do their thing as builders. And what happens then is like better builders have better profits and this makes this flywheel where they have better profits, they can get better building, they can scale up their validation operation and you just get this like again, flywheel that goes until suddenly like, you have these like really huge actors in the protocol. So again, if you're like the best builder, that's great for you. But if this, you know, goes unchecked then it's actually really bad for the protocol long run because now you have this like very fragilizing thing of this like one huge actor that's like easier to say attack and all sorts of things. So just like a note, you know, MEV kind of directly accelerates this problem which is probably why you've been hearing so much about it this week. So, okay, what can we do? There's a couple of things. One of them, proposer builder separation. Barnaby gave a talk about this yesterday, I believe. And I mean, the idea that I think is pretty straightforward just from the name. I mentioned that this builder role and sort of the proposer of validator role, the thing that actually is like minting the block on chain, this thing, these are tied together. So instead we can just separate them. And this sounds great. The question though is like how exactly you do it? And once you start looking at this in some depth there's a bunch of like subtleties and like open questions that have a lot of nuance that like still need to be worked through. So for example, I think like the leading designer now from Vitalik where basically we have two slots, alternating proposer and builder. And the point here is that you wanna have the proposer do their thing in a different context, have the builder do their thing and it sort of firewalls these two entities from each other. And that's great but then you have to make sure that it's incentive compatible. Like you don't want a proposer to like release their block too late after they've accepted a builder's bid and then because of that the builder doesn't have time to like reveal their block and it quickly gets to a lot of tricky situations like that. Another one is like actually deciding the mechanism of sort of selling the block space that a validator may wish to do. The default thing we do is like just enshrine an auction but then the question is like okay is that what we want? Do we want this thing where it's like I'm going to auction off my block space to the highest bidder? There's like a bunch of different ways to think about this. I will call out again Barnabay's very recent post on E3search, I'm bowling PBS and he talks about kind of maybe pulling the auction bid out and just having sort of this notion of like a commitment market where the commitment then is like quite general. Another point then is like yeah there's the integrity of this thing because kind of like I alluded to there's many actors now and they all have different incentives and you need to like align them in the right way. If you don't do this properly then well yeah if you don't do this properly then you can imagine like people just not using it. So one way you could fix that is you have a testers go and also test the chain. You know if there's this two slot process alternating you can have a testers attest what they see and in that way they strengthen again the mechanism but then it's like okay maybe they could be bribed like who knows. So point being there's a lot of open research questions there. Oh no my emoji didn't show up. Anyway it turns out that that's not the only problem. So even if we had a great PBS solution I think like I think the way to think about it is like you firewall off all this MEV all this builder stuff from the battery set so they don't have these pressures to centralize. That's great but then you kind of kick the can down the road and there's another problem where again you yeah you really just kick the can down the road to the builders because now the builders themselves could centralize. So we don't want to get to a world where you know there's like a few actors let's say like very sophisticated actors from Troutfy who are here and you know sort of gatekeeping access to the protocol. Like again it'll be a way for them to again violate Ethereum's values and that would be very bad. So I think it's even less clear how to handle this just because like the scope of the problem is so big if you thought there's like a set of issues the previous sort of like proposer builder sighting there's now like it's I would say even like less constrained so that's fun. And okay like let's think about this for a second like how do we how do we fix this? One option is just to say okay we will have like very centralized builders but we just want to make sure they can compete and the idea is that if there's like very healthy competition then there won't be one entrenched player and that avoids the situation where there's like is very direct gatekeeping where I have to go through like one or two entities to get on chain. So to do that we want to keep the barriers to entry of building very low and yeah maybe that's enough we'll find out. But still you know I think if you look around the world you see there's like power laws everywhere and so I think we'll still be you know even if we do have a healthy ecosystem it could be the case that there's like not a great distribution. So we can ask well what next? Well pretty much most of us here we can call ourselves crypto economists so we'll design a mechanism and what does that mean? Well we'll just read off this quote that I made up. What does it mean to design a mechanism here? Well we want to peer to peer network with proper incentive alignment to ensure safety and liveness of the protocol and now what does the protocol do? Well it facilitates the refinement of the block space and this way I was describing. So that's great but there's some like huge caveats. Huge caveats are we want to make sure that well I think there's many but like two ones to call out right are that the people who are using this thing like let's say users who want to like make some trade on Uniswap we want to make sure that when I make a transaction and for example it has some MEV then like I've actually generated a value that wasn't there before and it seems you know I think we'd all kind of agree it makes sense that the generator of that value should capture most of that value. So that's like a pretty big constraint on how something like this block space refinement decentralized protocol would look like. And another big one, censorship resistance. If you've been following any of the Mev Boost stuff which I'll touch on in just a second you see that this is like a very critical question because again when you have just a few sort of I mean yeah, centralized pipelines in the protocol becomes much easier for censorship to censorship resistance to fall by the wayside. So I'm just gonna keep going down I kind of want to just like sketch this path for you. Hopefully to jog some of your maybe like capture some of your interest or you know jog your creative juices but essentially what would decentralized building look like? I mentioned this FPC conference Vitalik you have a talk on this a bit so I'd also recommend that one. So but yeah, so for today the ways I've kind of been thinking about it lately are you have a builder and you want them to basically, well yeah so there's different contexts. The first context would be in a single domain and I'll kind of make that clear in a second but essentially you have a builder just imagine a builder on one chain and rather than this builder being like one server somewhere you can imagine it being split across mini servers sort of implementation wise. But anyway so that's actually not what we really care about like we care about higher level properties like we want this builder then to be able to again be like multiple maybe competing entities and so what that could look like is you have agents who are doing the building and they're not competing for like order flow for example so if this is like in a movie context you have people who are making trades and I'm now like working or perhaps competing with other searchers let's say to build the best block but we're doing it in a way that again we sort of enforce this competition. There I think the more you think about this there's like a trade off between privacy and execution because you know one thing we could say is as a user again of my Dextrade for example you know nothing and then it's just like grabbing random batches of transactions and like putting them into a block instead you could like kind of be in a setting today where you see everything and then you have sort of full information to even leverage against me and when people are front running they're upset about that this is exactly what the tension they're getting towards. If you're familiar with CalSwap so like one idea here is like the builder on a single domain context is you have you know imagine doing your DFI DAP but inside some APC circuit. CalSwap has this thing for basically settling trades off chain before they land on chain by just doing just the diffs or just like the remainder. So could be a cool research direction. Another one there's this DAP I guess maybe application sorry maybe protocol but either way it's called Rook used to be called Keeper now I think and either way at a very hell of a how that works is that they have like a trusted set of searchers who have access to a private mem pool and because they're trusted you know we trust them to then search and extract MEV but due to the way that for the value extracted most of it flows back to the users of Rook. So what this looks like is you have trades where you're paid to make the trade. You can do something like this and then the question that is like how can we tune this like trust spectrum so that we minimize trust while giving us all the nice properties we want. Another cool thing now is like you know there's not just Ethereum there are other blockchains and so now we can think about MEV in like a cross domain context and this one quickly gets pretty hairy because like when you think about it you kind of now like if we're gonna do this decentralized building thing across chains then you now need to like I mean yeah it's not even really clear how you do it like you can imagine like some crypto economic layer whatever that looks like maybe like a network of state channels maybe it could look like yeah I don't know again this is where it's an open question but there's a lot of things you could do and yeah so I think we'll see a lot of exciting research come out of this area in the future so yeah I think I've just tried to like lay out a lot of problems and maybe this seems like pretty hectic that's not good but yeah like I do think these questions around like the builder and like how the protocols use moving forward or like some of the biggest that we face as a community so I do want to call them out and yeah just be aware that there's a lot of thorny issues here so hopefully you are motivated to work on fixing them and yeah like I'd like to like end on a good note like we did the merge you might have heard of that one and you know really this is like an existence proof that like progress is possible like I'll steal a quote from Danny Ryan quoting Albert Knee who said that Ethereum is like an intellectual gravity well and yeah I mean I think that's the case like Ethereum is like a really outstanding community and I think that we're able to sort of adapt to whatever comes our way so I think good things are possible I'm running a little short on time so let me see I think I just had a few slides so yeah thank you okay my problem right so just a few more slides and the first one is I just want to again call your attention to like yeah how can we actually start to work on these issues with this problem of elder centralization like yeah just supporting R&D towards PBS I think there is some like nice PBS solution that we could get to and we may realize that there isn't one and that's also great but the work needs to be done and we'll see what happens in the meantime we have this thing called MevBoost so there's like an off-chain implementation of PBS stewarded by FlashBots and many others now they've recently made a call for like open stewardship of the project so that's a great way to get involved I've called out the Get Up Reboot for MevBoost there's also some stuff around how this interface between the core Ethereum software and the Splitter network works and those specs are under the Splitter specs repo some things that you know that community we'll be looking at very soon is like addressing censorship resistance I'm also working on this notion of a relay monitor there's this like very trusted actor in MevBoost right now called a relay and they can kind of do some bad things and the idea of the relay monitor is to add some like automated monitoring to figure out when they're doing things we don't like and that then we'll feed back into MevBoost to hopefully make the situation a bit better than it is today if you're interested to help there's a repo there that I have and please I would love contributions and then yeah I mean you probably get the sense that this like builder centralization problem is maybe even poorly defined like I think that's the first place to start there is just like defining exactly what we mean because I think it's like a big umbrella for many things you can start pulling a bunch out of it maybe if we can like define the problem we can start cutting into smaller pieces that are you know easier to make progress on you know for example if we do some sort of like MPC or like some crazy state channel thing then how far can we push the cryptography to like actually get the properties we want how could we like now in this like very complex system address or analyze all the incentives to figure out like okay this is mechanism actually work and I think so far FlashBots has done a lot of the thinking here so I just want to call out them they have a forum at collective.flashbots.net and if you're interested in thinking about this reading about this research and things like that check that out and that's it yeah thanks there might be just a few minutes for questions and yeah if you want to get involved just here's my Twitter and I can I'll answer any more questions you have direct you to the next stop all that awesome we can ask one or two questions if there's any questions just raise your hand quickly make sure it's a short one we'll pass that mic over there to you in a second just over there Hey my name is Marat I'm part of block native where we build a lot of blocks FlashBots has a great searcher reputation system I mean we can talk about how great it is and what not but I'm wondering if there's a reputation system that we can come up with within the protocol for block pillars in the future as well Right so I would push back immediately and ask how much we want actually in the protocol because like once it's there it's like very fixed but yeah I mean again like a lot of these I think more like research or like even you know even less formed ideas around distributed building need to take things like that into account like you're gonna have some actors who are like helping the builder do their job or you can even think like the searchers are the builders in this context and yeah like that's one way is like ideally we could have some cryptographic mechanism where like everyone does like perfect searching and valid like users get all the value that is allotted to them and that's great I don't think the cryptography is there and then perhaps it will be one day but not today so then yeah we'll then rely on like trust reputation things like this in the short term so yeah it means definitely a very interesting place to look at Amazing that's the time all the time we have for questions and we're ready for our next talk so please give Alex a big round of applause