Blockchain research and infrastructure provider Flashbots has introduced a new protocol called MEV-Share, which distributes a portion of the money made with Maximal Extractable Value (MEV) back to Ethereum users rather than just validators and block builders.
This new protocol was announced by the Flashbots team on its community forum and currently remains in a proposal phase.
To better understand how MEV-Share works, it is important to first define MEV, which refers to the maximum potential value that can be extracted from a blockchain transaction, including arbitrage and front-running of user transactions. Usually, the profits from MEV are captured by block builders on Ethereum, who determine the order of transactions and relay it to Ethereum validators.
Searchers, a separate class of participants, support block builders in identifying opportunities for MEV from transactions. Together, these two groups create an order flow for transactions in bundles, which is then passed to validators using a software called MEV-Boost to settle on the blockchain.
MEV profit sharing
MEV-Share is a new protocol that allows Ethereum users to benefit from the profits generated by MEV and become part of the transaction supply chain. By introducing a new entity called a “matchmaker,” MEV-Share matches bundles of transactions from searchers with user transactions, allowing searchers to optimize their MEV capturing efforts further, according to Robert Miller, Flashbots’ product lead. Sensitive user transaction details such as wallet addresses will be kept private, the team said.
Once a bundle is matched with user transactions, it is sent to block builders, who pass it on to validators for settlement on the blockchain. The matchmaker may charge a fee for the service, although the specifics have not been finalized. Bundles sent to builders come with a condition that requires them to pay back a portion of the MEV revenue to the user.
According to the Flashbots team, this system can offer benefits to searchers by providing access to fresh transactions, offers builders more order flow, and gives users a chance to get back portion of the MEV revenue made on their transactions.