What is Flashbots? – Cryptopolitan

Flashbots is a relatively new organization that aims to improve the transparency, fairness, and security of the Ethereum network. Specifically, Flashbots focuses on mitigating the negative effects of miner extractable value (MEV) on the Ethereum ecosystem.

MEV refers to the additional value that miners can extract from a block beyond the block reward and transaction fees. MEV can arise from various sources, such as arbitrage opportunities, front-running, and liquidations. While MEV can benefit miners financially, it can also harm the network by creating inequalities and centralizing power. Furthermore, MEV can be exploited for malicious purposes, such as censorship, manipulation, and attacks.

All about Flashbots – an in depth understanding

Flashbots emerged as a potential solution to this MEV problem in November 2020. Flashbots is essentially an organisation which connects searchers and mining pools together. Except instead of private contracts and agreements, it is an open participation system in which any searcher or mining pool can participate. This open system is believed to be far more beneficial to the network, than a few private entities dominating, because it still allows for competition.

Flashbots functions as follows. The searchers examine the blockchain and memory pool to identify MEV opportunities. When they discover such an opportunity, they create a transaction or a group of transactions to capitalize on it. They then submit these transactions to their centralized server. These transactions also include remuneration for the miners. The concept is that a searcher will no longer broadcast MEV transactions to the memory pool and will instead employ the its system.

The entity’s primary focus is to enable a permissionless, transparent, and fair ecosystem for MEV extraction. It falls under three goals: Democratizing Access to MEV Revenue, Bringing Transparency to MEV Activity, and Redistributing MEV Revenue.

Flashbots transaction fees

The fee structure for a Flashbot transaction (paying incentives to miners) differs from that of a regular transaction. Because the commission amount is included in the Ether value, the transaction cost for a Flashbot transaction is always $0.

You can manually set the gas price for Flashbot transactions from the confirmation box.

 The Flashbot gas prices are set to the current ‘immediate’ gas price by default. The current ‘quick’ gas price is the lowest possible value, and the highest possible value is the current ‘instant’ gas price multiplied by three.

Flashbots adoption

As of May 2022, it is estimated that over 90% of Ethereum miners are linked to the Flashbot server. This is demonstrated by the fact that over 90% of blocks contain Flashbot transaction bundles. Adoption increased from 0% to around 90% by 2021. When analyzing Ethereum, Flashbot should be regarded extremely important from an economic standpoint.

Another criterion for assessing the economic importance of Flashbots is to compare the value of extracted MEV to Ethereum fees. According to Coinmetrics data, total Ethereum miner fees in the last 12 months have been roughly US$10,740m. In comparison, the value of MEV harvested during the same time period was $393 million. 

Because this is only 3.7%, one could argue that Flashbots are not extremely economically relevant. However, 3.7% of income may have a significant impact on miner margins, and 90% miner adoption implies that it is an important part of the Ethereum network. They are crucial because it is anticipated to remain a substantial feature of transaction propagation in the future.

How to set up Flashbots protect

Flashbots Protect is straightforward to enable for those who are acquainted with the MetaMask wallet browser extension. Open the browser extension, select “Ethereum Mainnet” as the network, and then click “Add Network” at the bottom of the drop-down menu…

This will redirect you to a browser window where you must choose “add a network manually”

Enter the following information when prompted to add the Flashbots RPC:

Click save, and you can now send Ethereum transactions with the confidence that trades will not be front-run and fees will be paid only if transactions are completed.

Products offered by Flashbots

Flashbots offers 4 products to Ethereum users, infrastructure providers (validators and block builders), and members of the community.

1. Flashbots Protect (Ethereum users) – This is a remote procedure call (RPC) endpoint that any Ethereum user can use to prevent MEV bots (such as jaredfromsubway.eth) from front-running their transactions. Additionally, it prevents users from incurring transaction fees for unsuccessful transactions.

2. Flashbots Auction (Ethereum infra providers) – This is a marketplace for the optimal ordering of transactions. It enables validators to delegate the construction of blocks to a network of third-party block builders, thereby maximizing block profitability.

3. MEV-Boost (Ethereum infra providers) – This is an open-source middleware developed by Flashbots and employed by Ethereum validators. Validators using MEV-Boost sell their blockspace on the open market to increase their staking yields through the Flashbots Auction process.

4. Flashbots Data (Ethereum community) – This is a suite of tools and interfaces designed to provide transparent insight into Flashbots Auctions and MEV activity on Ethereum more generally.