Is EIP 8105 for providers or builders?

Transcript

Uh, thank you, the organizers, having a Well, it was a very informative like uh slides. Uh, my questions are as a builder, how much does this AIP affect the builder side? Or is it uh more a provider side uh change to ecosystem? Um, both. I mean, we would change both, right? But, um as may specifically on what happens to the builders' bottom line, right? Could be a question. Um I'd say the Yeah, so like very simply speaking, kind of like the the

the total MEV would be reduced by the amount of front running, right? So, the pie would kind of like in the first place get a little smaller to distribute, right? Um again, I think there is a way to make it such that the same back running efficiency and same way to back run can be applied. So, in our view, it would be only the front running that would disappear or the front running type of MEV. So, and then you can make the argument for builders and searchers and validators, usually that gets split up, right? You you have some amount of MEV, and that gets kind of like distributed between between um between the searcher who found the opportunity, the builder, and the and the proposer. And then maybe even some of it gets get gets paid back to the user depending on on Yeah.

But, so so I think arguably the pie gets smaller by by the amount of front running. Um so, you could argue the income for builders would shrink slightly, yeah. Which I think is a fair argument. It's That's not That's probably not good for builders, right? It's not It's not good for their for their income. However, I would say one of a couple of things um that one is I think everyone kind of agrees that front running isn't like a very sustainable to way to sort of make money. Um again, we've seen it is even illegal in the real world. Might might become We've seen even comments from regulators that they see MEV and front running in crypto similarly to front running in the

real world. There might be even like ideas to regulate it. Um number two, it scares away users, right? So uh it's just not a like you see it with rollups, right? Rollups are definitely not front running their users. Um uh they're kind of like trustworthy rollups like Optimism or Arbitrum uh they have they can front run their users. They could. They're also just choosing not to it because they know it's really extremely bad for adoption, right? So So I would say everyone agrees front running will go away or is already been going away.

Just it's just a question of how exactly does it go away and who and how are we just eliminating it by now we're trusting someone not to front run or are we kind of fixing it on on on the lower level? Hopefully that answers the question. Thank you, Luis. I really liked your answer, actually, because uh the second question of mine was about MEV. Uh so are you saying that uh it essentially disappears? Um and yeah, no. So uh I tried to explain that basically I'd say we roughly separate between front running and back running. Front running is the one where you jump in front of someone and back running is the one that your trade does something, changes the price

of an asset and that in like let's say displaces the price to certain degree and now it's now you have a 1% difference of the price to maybe a price on another DEX which is maybe more true to the true market price. So that creates this 1% arbitrage opportunity. So back running means you attach yourself directly afterwards and exploit that, right? So um front running can be uh can be basically solved by this incentive and pool approach. Back running cannot um or not not reasonably. And And that's actually not a bad thing in in some ways, right? Because back running people actually uh either they tolerate it as a as a okay

thing or they would even say it's a good thing because arbitrage helps makes prices be or better across exchanges. And And if you pay back the arbitrage profit to the user, then it even gets him a better price as well. Um so we would expect that just the front running um profit uh just just the front running MEV disappears or gets shrunk by a lot and the back running MEV remains. And again, as I said before, I think that the front running that's that's that's I would say general the consensus that you that front running is not a sustainable way to to earn income. Even Flashbots or other

kind of people who are deeply into MEV the systems how they set it up are already kind of like set up in a way that uh that they're choosing kind of based on trust not to front run. So you're base as I as I understand you're basically saying that you can still see the trend of MEV in but in the past, not in right now with front running. Yeah yeah, I would say that the the the the front running will go away anyway, right? Uh and back running MEV will remain because uh that's just arbitrage, right? In the real world, there is no MEV. In the real world, you just have trading and arbitrage and front running.

And front running is illegal and stupid. And back and and kind of trading and arbitrage still exists and that's good because arbitrage means you're you're exploiting all the little inefficiencies. Yeah, so I think that's the same level you could just think about in crypto as well. Uh front running is cheating, like you're jumping the queue, right? And back running and arbitrage is just trading and you're just make just means somebody is is exploiting arbitrage opportunities and it's actually positive.