diff --git a/mev_protocols/README.md b/mev_protocols/README.md new file mode 100644 index 0000000..7690148 --- /dev/null +++ b/mev_protocols/README.md @@ -0,0 +1,35 @@ +## MEV protocol solutions + + +#### private order flow protocols (POFPs) + +* rpc-based mev solutions (private order flow) +* private orderflows are realized by modifying either the user's rpc or by modifying the protocol's frontend +* the goal of private order flow protocols (POFPs) + +
+ +--- + +### validator transaction reordering protocols (VTRPs) + +* private tx reordering +* two goals: 1) identify valuable user txs, 2) replace the POFP's value-extracted tx with its own value-extractive tx +* when a VTRP is able to identify a valuable user tx but, due to the tactics of the POFP, is unable to inject its own transaction in place of the POFP's -> VTRP's optimal strategy is to censor the user's transaction from the final block + + +--- + +
+ +### stat arbs + +* if CEX is greater than the price on chain (on theDEX), stat arbs will buy on the DEX and hedge on the CEX -> confident that the DEX price will drift towards the CEX price, but not confident that will happen to the CEX price +* problem: settlement mismatch -> CEX trades are fast but blockchains aren't -> start arbs are unsure if the trade will land or competitors will beat them +* from the time between trade submission and receipt of the next block, the trade (their exposure to the assets) is uncertain +* the greater the uncertainty, the more the profit estimate needs to be marked down +* while volatility of the token is important, the longer the time period between blocks, the longer tx remains, and the longer can go without being fully hedged +* as block time increases, stat arb MEV profit estimates get marked down -> payments made by stat arbers to miners/validators or to users/traders decrease +* conclusion: the battle between PFOF-style MEV could lead to increase block times for stat arbers, decreasing combined realzied MEV + +