1/ 

The Peraire-Bueno "Mev Brothers" trial just ended in a mistrial, but most people have no idea how onchain MEV works, or what the guys actually did. 

So I wrote a little story trying to explain it end to end:

You hear of a new grocery store in town (DeFi) and decide to check it out. It’s full of self checkout kiosks that other businesses and locals have built and set up inside.

Approaching a black and pink self checkout machine (Uniswap) you select “banana” (a token), it asks what you’re willing to pay (slippage) you pick “Market Price”, insert your $1.00 (ether) and finish your transaction.

“Wow! The future!” You think to yourself whistling a merry tune. In the corner of your eye you notice a peephole in the wall and curiosity gets the best of you. Through the hole you see a dimly lit warehouse and a conveyor belt carrying customer orders (the mem pool).

Artist + Software Developer  / onchain art and smart contract experiments /  
Previously AR-VR and Neurotech
https://sterlingcrispin.com/

4/

Adjusting to these changes, the mafia (bot operators) that run the warehouse zombies coordinate to reduce the violent stampede of fighting over customer orders into a new system (Mev Boost).

In the new system, the warehouse zombies and a few human helpers (MEV bots, searchers, and block builders) design the checkout list of customer orders, and the cashiers (validators) can’t see the zombies anymore. They’re separated by several rooms and a sound proof wall. It’s a more civilized system, but still mostly benefits the warehouse mafia not the customers.

Now, the zombies write their checkout list into a sealed envelope, with a note on the front saying “Here’s a $50 bribe if you pick my envelope.”

That envelope goes to a shift manager (a relay) running between the warehouse and the registers. Their job is just to check that the envelope really came from the warehouse and to keep it sealed until a cashier (validator) has agreed to scan it.

3/

The warehouse zombies who front run your order sell all of their bananas back to the store and get $10,000.90 back (The other half of the sandwich attack). They’ve stolen your ninety cents and screwed you out of your banana. There is no crying in the casino. Thanks for playing. Have fun staying poor.

After many years of warehouse warfare, operations are reorganized, the warehouse is upgraded. Before, the cashiers used to prove registers were secure by doing long division on paper (proof of work). Now, they put up a damage deposit to work at the store (proof of stake). And if any of them disagree about where funds in the store are moving, they get their damage deposit taken (validator slashing).

brutal sandwich attack, got my banana stem for free lol

2/

Horrified, you watch as a violent hoard of zombies (MEV bots) emerge from the darkness of the warehouse. They’re covered in piss, blood and filth. The sight of them makes you throw up in your mouth a little. Calloused hands claw at customer orders in a grotesque stampede. A new order for ten thousand bananas has been placed in front of yours on the conveyor belt with $10k in cash (front run sandwich attack).

As the items reach the cash register, the massive banana order drives the price to $500 a pound. The cashier (validator) looks at your order, and your pathetic $1 bill. It’s not enough to pay for the banana anymore. So the cashier just rips the banana stem off and puts it in a paper bag for you along with your receipt. You said you wanted the market price after all.