Best-(Worst-)Case MEVil Response

In a recent exploration, the focus has been on devising strategies to counteract the potential proliferation of MEV (Maximal Extractable Value) exploitation on Bitcoin. This investigation led to a proposition which extends the paradigm initially adopted by Ethereum with its PBS (Proposer-Builder Separation). Unlike Ethereum's approach where proposers put forward complete block templates, the new proposal suggests that bidders should aim for the inclusion of individual or grouped transactions into blocks. These bids could be based on specific constraints, such as desiring precedence in transaction inclusion for interactions with a particular Decentralized Exchange (DEX), identified by unique transaction strings.

The proposed system aims to maintain the integrity and reliability of the public mempool as a means for transaction inclusion, ensuring censorship resistance remains akin to current standards. By enabling miners to source transactions from both the public mempool and private orders, it opens avenues for MEV-extraction specialists to directly compensate miners for the inclusion of specified transactions. Furthermore, the introduction of marketplaces for private transaction inclusion is suggested, which could either operate on a basis of trust with miners or utilize Trusted Execution Environments (TEEs) to encrypt transactions. Such transactions would only become decipherable upon the discovery of a valid block that meets the predefined constraints.

This methodology not only presents an innovative way to mitigate front-running and other MEV-related issues but also significantly alters the centralization dynamics inherent in Bitcoin's current operational model. The recognition of this shift towards centralization raises concerns, suggesting a preference for a future where such measures are unnecessary. However, the proposal emphasizes the importance of preparing for a scenario where MEV becomes a dominant aspect of the mining ecosystem. For further details, refer to the initial posting at 1.