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104 lines
5.2 KiB
Markdown
104 lines
5.2 KiB
Markdown
# [KeeperDAO notes](https://docs.keeperdao.com/reference/)
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<br>
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**KeeperDAO uses the power of Coordination to create more efficient markets by capturing and recycling MEV to the
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users and protocols that create it.**
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<br>
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**KeeperDAO is a decentralised and coordinated Keeper commonwealth making the Ethereum network more egalitarian, profitable, and secure for all the actors involved.**
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<br>
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---
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## Core Products
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<br>
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### The Hiding Game
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* Gasless limit order system that sources liquidity from all means supported by KeeperDAO Keepers.
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* If a user's order creates a MEV opportunity, the user will be reward with a share of the MEV profits in the form of ROOK.
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### The Hiding Vault
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A generalized liquidation-mitigation lending and borrowing NFT product.
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* The first platform supported by Hiding Vaults is Compound Finance.
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* Using a Hiding Vault mitigates both the risks and the impacts of the liquidation of users using Compound Finance.
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* If a user's position is liquidated, the user will be reimbursed with a share of the liquidation profits in the form of ROOK.
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### Liquidity Pools
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* KeeperDAO offer five single-asset LP that yield ROOK tokens (ETH, WETH, USDC, renBTC, and DAI): users earn ROOK rewards based on the number of ROOK rewards allocated to the pool each quarter.
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<br>
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---
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## MEV
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<br>
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### How the blockchain works
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* Each block in the blockchain contains a list of transactions in a particular order, enconding a sequence of updates to the blockchain sate (world state).
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* Anyone can broadcast a transaction to the network, which means that the transaction is public. A broadcast is a request. In order for that request to be carried out, someone must place the transaction in a block and add the block to the blockchain.
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* Anyone can listen for transactions being broadcast and gather them into a list. In order to a turn a list into a block, it needs to be validated. Validation creats a mathematical (cryptographic) proof that the state changes are consistent.
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* In a proof-of-work blockchain, block producers are miners. In a proof-of-stake blockchain, they are validators.
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* The act of converting a transaction into a block is called *settlement*. The process of block production is called *settlement layer* or *consensus layer*.
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### Arbritage opportunity
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* Results from a difference in prices between the same asset, listed on different DEXes.
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* A transaction that makes the right swaps along the right arbritage route will end up with profit.
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### Keepers
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* Bots that observe Ethereum, and other blockchains, to faciliate sorts of transactions, such as arbitrage, liquidations, auctions.
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* Automated agents that survey the state of the blockchain and compute all the different possibilitie in order to identifty transactions that can create profit.
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* Once Keepers have identified a valuable transaction, they will broadcast that to the network. Other keepers can copy and broadcast the same transaction with themselves as the originators.
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* MEV arises from the problem of "how can a keeper ensure that they are the one who gets a transaction settled first?
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* Keepers compete with each other in a zero-sum game, transforming Ethereum into a highly zero-sum game.
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* Inside KeeperDAO, keepers don't need to compete - but coordinate and capture on-chain profits efficiently. DeFi users, protocols, market makers can bring their activity to KeeperDAO and gain a portion of the profits as a reward.
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### Maximal extractable value
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* Refers to profit that can be extracted from a transaction from the transaction originator needing priority or control over the ordering of that transacion in a block (*the arbitrage has 45 WETH of MEV*).
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* [As may of 2021, around $3-4mil of MEV is being captured daily](https://explore.flashbots.net/).
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* MEV exists on any blockchain and layers where there is a party responsible for transaction ordering (eg. validators, rollup providers).
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* Extracted MEV = Successful MEV transactions + Successful MEV transactions gas fees + Failed MEV transactions gas fees
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<br>
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### ➡️ While it seems simple, MEV poses risks not only to the user but also to the consensus layer itself. The reorganisation of blocks, the reordering of transactions, and — even momentarily — the censorship of transactions can have profound impacts on the blockchain and breaks the assumptions of many applications.
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### ➡️ Because block producers are able to prioritize transactions with higher gas fees, a bidding war between bots (who either try to arbitrage or front-run) can occur. This hurts ordinary users and DeFi platforms, because these bidding wars drive up gas fees (Priority Gas Auctions) and cause slippage and failed transactions
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### MEV strategies
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* Common MEV strategies are front-running, back-running, and sandwiching.
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* MEV should accrue to the originator of the transaction, or of the transactions or protocols that create the MEV in the first place.
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* Using KeeperDAO's **coordination layer**, we can capture and recycle the MEV before it can be extracted.
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<br>
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---
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<br>
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## KeeperDAO Coordination Game
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<br>
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<img width="861" alt="Screen Shot 2022-03-27 at 5 07 33 PM" src="https://user-images.githubusercontent.com/1130416/160282861-7677206b-d47e-4f54-bdc1-d44e24d43604.png">
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