MEV: existential threat to blockchains or solvable problem?
You may have heard of Maximal Extractable Value, or MEV, which refers to the extraction of value from Ethereum users by reordering, inserting, and censoring transactions within blocks by block producers. It's become a hot topic of debate on how best to deal with it, however these types of conversations can become very technical very fast. In order to break it down, for this episode I spoke to Luis Bezzenberger (@bezzenberger) who works at Shutter Network, an anti-MEV/front running solution ...
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Hi everyone. You are listening to the Blockchain Socialist Podcast, and for today's interview, we want to talk about something that you may have heard about but probably don't really understand completely, and that is the world of MEV or minor extractable value or, I think sometimes now it's called maximum extractor value. And I have today Louis Bessenberger who works at BrainBots as a product manager for Shutter Network, which is one of the projects that is sort of, in this MEV space. So hey, Louis. How are you doing? Hey.
Nice to meet you and
glad I'm here. Thank you for having me. Yeah. Of course. I hope you can sort of shed some light on this very very, strange world of MEV, what I gather, or at least what I've been able to understand of MEV. But maybe as just like a quick if we can just quickly like, if you can give us an introduction for who you are, what you do, and,
yeah, what got you into into Shutter network. Yeah. I, work as a product manager for Shutter since, around a little over a year, basically. So I've been at BrainBot since, 2016 doing other things. So BrainBot is kind of like a little project builder in the space doing doing all kinds of, sort of different protocols. But, yeah, now I'm since since a little over a year, a product manager at Shutter. My my background is in finance originally. So, so I'm not really on the technical side. So it's kind of like a good match, I think, kind of coming from that finance background, a little bit consulting background. Now kind of trying to steer the project from the from the business aspect sort of. And then, and then all the all the technical credit should go to, my colleagues, Yannick, Max, and and some others from from the team, Ralph. Yeah.
Mhmm. And and Brainbots, just just to add is also, the project behind, TrustLines or the organization behind TrustLines, which I've talked about before, on the podcast. Exactly. Yeah. And then you guys are doing quite a few things. Yeah. Including Shutter Network, which is, well, we'll go into that because I think it'll be it'll be interesting. But maybe to start off, would you want to explain a bit what exactly is MEV and, like, why is it such a intense discussion point in, I think, very niche groups within within crypto?
Yeah. Okay. Yeah. So maybe let's start with the sort of like the, the textbook definition. Start with the problem. Yeah. Or we could Okay. Yeah. Let's start with the textbook definition and then let's go to the problem. So the the definition is basically maximal extractable value is the, value that the block producer so that could be the validator or could be a sequencer or like a miner, that the block producer can extract from, front running, censoring, injecting, or generally sort of like ordering the transactions. So so, in a classic proof of work setup, the miner has all the kind of the ultimate transaction ordering, kind of power. So any, any kind of arbitrage and, and MEV, that gets extracted is ultimately in the power of the miner to extract or, yeah, to command, basically. So that's kind of the the textbook definition. But, yeah, let's go back sort of once the take one step back and and say what is the actual problem is, essentially is people so the simplest version of of MEV Pro is front running. The simplest to explain version is front running, which is you put in an order. Let's say you put in a buy order. Someone has some someone somehow has access to the the exchange that you're trading on, before you and some for some weird reason, they can jump in front of you. So, basically, they see your order, see that you could want to buy, and then you you basically have already committed to buying. So this attacker, says, okay. And I see that this person needs to buy. So I can buy cheaper, basically, or I can buy at the current price, drive up the price, basically, and then sell to this person that originally, put up this order and had had to buy, basically. So, essentially, it's kind of like stealing this person's money that, that wanted to, that just wanted to do kind of an ordinary trade. Right? And the this phenomenon exists in in normal finance. Right? In normal in the in legacy finance, you solve it via trust, basically, in regulation. It's kind of, like, illegal to do it, or you trust the exchange, to do it, and you have to pay a lot of money on transaction fees to to make that that this exchange is super trustworthy. Right? They wanna they want to they want to have a good income to to pay for this. And then and, in crypto, it's it's it's different. So originally, it was just a free fall, sort of like the the mempool is public. Everyone can, everyone can see all transactions, and it depends on how good you're positioned, how good your access to transactions is. And since then, we have Flashbots. So it's the the game changed a little bit. Yeah. But essentially, this problem in in in crypto is is originally was very unorganized and very and even extremer than in legacy finance. Legacy finance, again, is kind of solved via this trust. Whereas in in crypto, it's just chaotic, and it leads to a lot of value extracted, that way because it's this wild west kind of. So the the founder of Flashbots, Cefani, he estimates somewhere between sort of, like, 5 and $15,000,000,000 of MEV extracted alone on Ethereum, l 1. So that's that's if we're talking about the problem, kinda, that's this this entire value extracted. And and how this manifests for users is, again, like, getting front run, getting a worse price on exchange, and also kind of the the user experience issues of if you don't let set your slippage, high enough, basically, your transaction can also fail. So worse prices for your transactions. Yeah. I think it's interesting because it's something that
in the narrative of blockchains and crypto, it's it's a lot of times they talk about the decentralization and also that, like, things are there's sort of this implicit implicit thing that markets are sort of the markets are fair on a blockchain system or that, like, they're they're fairer and they don't have, like, the because of the transparency, it doesn't have the issues as, like, legacy finance. Legacy finance had, of course I don't know if you've ever read the book Flash Boys by Michael Lewis. Yeah. It talks about, like, high frequency trading where basically the game was just, arbitrage very, very small amounts just because you had a wire that was slightly shorter that made it to the exchange. Therefore, you were able to make your, orders before everyone else, and you can front run all the different trades that were happening and if you have access to that information. And so now they have various, like essentially, that money, I feel like, goes to the exchanges so that they guarantee that you're not going to be front runner that, you know, high frequency traders are not going to, steal money from you. And and, yeah. To to jump in just just quickly, there's all these other
legacy finance concepts that MEV, maps to. So one of this is front running, the classic kind of Flash Boys front running. But another one is this payment for order flow. Basically, like, so if you trade on Robinhood, then ultimately, your your trading your, order flow is bought by another entity, let's say, hedge fund or someone who can who has more direct access. Again, kind of like MEV. Right? Benefits, basically, profits from from this retail order flow. So that's that's how it maps to this legacy, multiple legacy legacy finance issues or problems. Yeah. And and the beauty of crypto is, in theory, we can we can solve it at the protocol level. Right? We can like, in in the real world, we have to solve it with with trust and with regulation. And in crypto, we have the potential to solve it at the at the protocol level.
Right. So I think, like, at the moment, it seems like in the discussion about MEV, I see a lot of various viewpoints on, like, whether MEV is a good thing, whether it's a bad thing, whether it's something that should be solved, whether it can be solved. I think, because I think from my understanding, the the Flashbots point of view so Flashbots is a company that, I think they they offer basically, I think it's called, like, MEV boost or something like that where you can, yeah, just a way for peep almost like democratizing the the gains from MEV to more people rather than sort of leaving it to, like, one specific person who can sort of, take all of the extract all of the value through MEV. But my impression is that from them, they say that MEV cannot be solved. Yeah. And that it's something that, since it cannot be solved, we have to just share the MEV. Almost like a a negative lottery system. Yeah. So,
maybe maybe just take one step before there is like the when I say the problem of MEV and and how and before I kinda was talking about how it harms users, what I actually mean is it's it's not the entire MEV that is fully kind of malicious and harms users. It's it's a subset. So it's some subset of MEV that that we would consider, as being harmful and malicious. And it's very hard to define what that subset is and how bad it is, because there's definitely also good parts like arbitrage and liquidations, basically. They help the markets be more efficient. They they equalize prices between DEXs. Or, again, like, liquidations are an important component of of these systems. Right? So that's that's where this view from Flashbots comes in and saying, not only can't we solve it, but, also, it's not entirely bad. So even maybe we can leverage, leverage these MEV searches to do good. And actually, we don't we don't disagree with this. We we fully kind of agree with most of the, things that Flashbots, are doing and saying. And we kind of how our perspective would be is that you can probably prevent or mitigate at least to to a high degree, front running in these sandwich attacks. And what's harder to prevent, and we don't even wanna prevent it, is this arbitrage and liquidations basically. Yeah? So this is where kind of these both worlds fit in very, very well together that ideally we can and want to prevent the the malicious types of front running, of of MEV. And we want to allow through and and we would agree with Flashbots mission. Let's let's democratize and let's organize the market. Let's put market mechanisms at each of these steps to, democratize
the the benign parts of parts of MEV. Yeah. Could you explain a bit maybe, like, how does someone do MEV? Like, how does if if I wanted to today, like, take part in in MEV, what are the things that what is what is it, like, step by step process or more or less? I know it's kind of abstract, but, how would I start doing MEV if I wanted to today? Yeah. Maybe to preface, like, we are not really doing MEV. So we're I'm gonna I'm and I'm a not a technical From your end. I'm
I'm only gonna be able to give a very high level sort of, overview or kind of impression just from what I've heard from talking to MVs searches, essentially. So I would say you you you you you choose an you choose a niche. Right? You you choose you choose some some, area which you think, you're you you could have an edge or or probably you're starting with something that's simple, and and that's your niche kind of. So something like generalized front running on on Uniswap or something. That's probably gonna be completely worthless to do on on Ethereum one because everyone is doing it. But maybe that's a way to to train for it. Right? So so maybe you choose that niche or choose that initial kind of kind of strategy, and then you would, get set up. You can be probably alone. Like, some a lot of people just start alone, I would say. And they they research these systems. They would, they should know about scripting. Right? So they should they should have they should have financial knowledge, but also, let's say, programming knowledge to to script together these transactions. And yeah. And then set up their they're set up in a way that they would well, now they would probably use Flashbots, or yeah. So Flashbots protect us their RPC, and, and then kind of choose their strategies, script their their strategies, and and execute them, basically. Yeah. And then from there, they will probably gain experience, understand, understand the vulnerabilities or understand where there's arbitrage opportunities and move on from there, let's say, to something more specialized or let's say some some crazy strategies like multi block MEV or, or maybe another chain like Solana.
But in order to do MEV, from what I understand, is that you have to have access to, of course, like, the whoever is validating the blocks. So whoever either proof of stake or the miner. Do you have to run your own node to do that, or is there infrastructure to for an understanding, you could, like, bribe basically miners or validators to do MEV for you? Yeah. That's Flashbots, basically. Yeah. So Flashbots is that bribing
infrastructure, essentially. Yeah. So you probably don't no longer have to run your own node. So yeah. And that, that'll I'm not sure about if that's also true for, let's say, the discovery as or the the mempool aspect of it to to first, you have to get a a good grasp of what other transactions. So maybe there's things you have to run, knows you have to run to get to to get get the information. Yeah. But in order to execute it, you would send it to via flashbots probably. Yeah. And if you're on another chain where there is no flashbots, then what do you say probably applies? You probably, so either you would then just do kind of like arbitrage. So not not really so you would then just just try to be faster than the others kind of, without having this direct minor access. Or as you say, you have to find some some channel with a minor, or validator. Yeah. But that's that's obscure. I'm not sure about how the how that really works like that.
Yeah. Yeah. No. Yeah. I think it's, what I imagine is that if you want to start doing MEV, then you need to have, like, a very good understanding of how generally some DeFi protocol works, for example, and, like, what are the the patterns there in which you can exploit. And that means, like, probably doing a lot of data analysis of when happened of what happens when and, like, when how to then tell your scripting language to identify when those opportunities arrive, and then you have to like, it seems like a just just a very complicated and almost, like Yeah.
You have to be an extreme nerd Yeah. Partially in order to, like, get there. I think either you have to be depends on which MEV you do, but either you're probably coming at it from, like, an high frequency trading kind of mindset where you're a trader kind of, and that that's maybe one type. And another type is probably more you're a hacker, basically. Right? So you understand an architecture. You understand how oracles work, in this specific DeFi protocol that you sort of want to exploit some vulnerability. And then and then you execute your exploit. Right? So so those are probably also two different two quite different profiles of, like, kind of this classic more like trader mentality. And then the other one is probably more really like a like a hacker mentality, I would say. Yeah. Do you have any insights into, like, the culture around MEV? I guess, the things whenever I
sort of do a little bit of research into who are the people that are doing MEV, because some of them none of them, as far as I understand, are, like, public people. A lot of them are just sort of, like, anonymous. Yeah. Almost like, black hat hackers or something, and they're, like, very cryptic. And they sort of, message one another or whatever through, like, blockchain transactions or something like that. And, you know, there'll just be people with, like, they just have, like, anime, you know, profile pictures online or whatever.
It's a it's a bit of a strange world. It comes off to me. Yeah. I don't Very cyberpunk. Yeah. I don't have more I don't even have any any probably more insights than you have on on this because, yeah, again, we're not really deep into into this. So, I mean, we've organized a couple of MEV events. First one, like, back in in Paris, like, last year last year, UTC, then one, the MEV day in Amsterdam. Yeah. So, and there I met some MEV researchers. Right? So that's the only that's the only, so that that's where where I can overlap with this or I can tell about this culture. But, yeah, what you said is, I think, correct. They don't need to be public facing. They don't need a marketing department, basically. They don't need to do sales. Yeah. And, and there maybe some of them are nomads. Right? Some of them I met, traveling around. I think all of them are very smart, so it's very, very interesting most of the time, very smart. Maybe they have backgrounds also in other similar types of, let's say, scripting or hacking kind of little. So things like probably like someone like who's a scalper for, let's say, PS files. Right? That could also be someone who could be interest could could come from the outside of crypto into yeah. They
see it as, like, like, front running in just various, like, digital front running in different,
areas, I guess. Yeah. And very smart and not definitely not not really so maybe the outside perspective would be all these are, like, exploiting everyone, so they must be sort of, like, evil people. I wouldn't say that. I wouldn't say that they're evil peep like, I think I think they they're aware of what they're doing. They're even, like, aware of, oh, this is this this could be bad, what I'm doing. But, so so, yeah, I think they're self aware and they're very smart. But yeah. Yeah. But then other otherwise, I think what you said is correct. It's like like an a cool kind of enemy culture and non culture. Yeah.
How how would they, I guess, justify their actions, do you think, most of the time for, like, doing MEV? Good question, I mean Are they, like, nihilistic most of the time? Like, I'm just doing this to make money. I don't care. Or
they've also seen people say, like, I'm just trying to help, you know, markets be more efficient or something. Yeah. Probably the latter. Right? They probably say, well, if if it can be exploited, it should be exploited such that the arbitrage then leads to, more robust systems and more equalized prices across yeah. And then it's and and I think that's a very interesting discussion. Right? And I think in a lot of cases, that's true actually. Like, I would also say, like, if well, if there's if somebody can extract it, then to probably do it so that it becomes obvious so that we can build better systems to to prevent it in the future. But then I would say the counterargument would be we've also seen I would say we've also seen that with Flashbots, for example, we have more MEV right now. Right? So so so also some of these actions could also, yeah, just straight lead to more extracted value, more and more user harm. Yeah. But then the discussion is is that short term or is that is that is that a thought is that is that gonna persist? Is that a long term evil that's coming? Yeah. Yeah. And then there's a whole discussion that we could have that I don't I can't really go into, but or that I'm not equipped to go into. But the whole discussion about this time bandit kind of forking attacks where, where you could also kind of go even deeper and, yeah, sort of this time band attack. Travel back in time, basically, use another, use a use a fork, basically, to to to do your time bandit text on. And and the interesting stuff there is that someone proposed to do it last year, and then everyone said, no. It's bad. It's evil. We shouldn't do it. And the the interesting part is actually people don't really do it. So there seems to be also some level of social barrier. There seems to be some barrier of, where people are Like social acceptance. Yeah. Where people are actually stopping on doing, oh, maybe it's not profitable. I'm not sure. But seems to be there's also some limit that people don't want to overstep.
Yeah. For now, at least. For now, at least. For now, or maybe exactly. Yeah. So it's yeah. Then for you, I guess, do you think that MEV is something that should be solved in some way, or should it be normalized as something that we need to just deal with if we want to use Ethereum mainnet? Because as well, just to clarify, I think, MEV is just, like, it doesn't happen on layer twos
It it For the most part. Well, it is. Yeah. Well, let's let's go to that first and then answer the the the first question. So definitely does also happen on on layer two. So the the there the power lies with the sequencer, right, that that is ordering these these transactions. And then it depends on the sequencer. There there's some sequencers who choose not to extract the value, and then there's some sequencer who do extract the value, and then they distribute it, in some way. Yeah. So, so def definitely, it does happen on l two already. Maybe not not to the same extent as on l one. Yeah. But, a, it does happen, and, b, we think it might even be a bigger sort of long term, it might even be potentially a bigger topic because, generally, we expect the sequencer to be a more sophisticated, and centralized entity than a than a minor. Right? So so we might even see more sophisticated and even more MEV on l two. So so that's what I would definitely say. And, related, our main kind of target to to prevent front running is is on the l two level because we think all all trading activity will be on l two. Yeah. But but maybe we go we go into that later. The and then the first question you said, is MEV solvable? I would say no. So that that no. MEV is not solvable. So, but the thing is, I would say is there's a certain subcategory that we can mitigate and prevent. Again, like, I think this it's the front running, especially that we can make a big dent into. And hopefully, that's the the malicious kind of MEV that we can prevent. And, and, hopefully, the benign kind of non malicious parts of MEV, we will remain, and those will hopefully even make the system better. Right? Again, arbitrage, hopefully, leading to better prices across, across Texas, and and similar. Yeah. So so I think that's there'll be the hope that we can prevent the sort of the most middle part. And then for the rest, hopefully, we can, make an ecosystem where MEV researchers work towards overall user welfare, basically. So so it would be the dream. And then and then that reality is much more complex. So the reality of classifying what is good and bad MEV is a lot more complex than this. But as a as a very high level sort of guiding principle, maybe maybe this this works.
So you think that, like, they're, like, probably the Ethereum I don't know. The Ethereum Foundation is not going to try to solve for MEV at the protocol level.
The yeah. I mean, yes. They could. Yeah. So, well, I think the Ethereum Foundation is stepping back. They don't want to dictate the the client, specification. But, we've had very good talks with a lot of a lithium foundation, kind of researchers and, people involved in the in the designs there and, also from their MEV. They they're also, definitely looking at MEV. So I think there's definitely hope, midterm, long term to have some level of, again, front running protection, I would rather say, at the protocol level. And then and then you would have, Flashbots coming in with with their proposal of Vitalik and Flashbots probably as well, like, with the p with PBS. Right? Proposal builder separation, which probably, from their perspective also, mitigates some issues around censorship, overall improves the the, situation also at the l one kind of protocol level. Yeah. So so I'd say definitely it's gonna happen. It's just about complexity and politics around it's gonna take a while for for protocol level changes like this to to materialize. Yeah. And until then, we'll have MEV boost, and, flash bots. And then and then until then, we have maybe the opportunity to solve or not to solve, but to mitigate front running, at least on the on the l two level. Yeah. And possibly also maybe some other people are are trying to solve it at the at the depth level. Right? Someone like Cowswap would, kind of try to solve it at the DEX application level, which is also, I think Right. A valid approach. Yeah.
So just to say to clarify, Cowswap is one of the DEXes that is MEV safe, I guess you could say. Or prevents MEV through I'm not exactly sure how they do it, but Yeah. So they so they so they have auctions, like,
sort of mini auctions. They collect these orders. And essentially then they have solvers that try to find the best solution for all the orders that came in during this through this auction period. And the solvers are supposed to solve this problem not according to, like, maximizing MEV, but basically maximizing overall trader welfare. So kind of yeah. So if that works like this and if they don't if they are kind of maybe they're a little bit trusted to the to a certain degree, to do that and yeah. But if that works and they compete against each other to provide solutions that, that optimize overall trader welfare, then then it can solve for this specific for this specific type of, decks, it can it can solve, it can mitigate
a large portion of MEV. Yeah? Right. It's sort of a the CAL part stands for a coincidence of wants. So, like, if there are not there are if there are trades within this auction period that that complement each other, then you can sort of you have this coincidence of wants. And then just to clarify, when you're talking about, like, arbitrage like, good arbitrage, I guess, within between DEXs using MEV is that what I'm my impression is that that is whenever, for example, you may want that because a very, very big purchase or a very, very big, like, sell happened on another DEX, and you want to just equalize, like, prices a bit better rather than allowing such, like, a huge gap between, like, maybe your DEX and another DEX, which can cause, like, you know, just a a frenzy of arbitrage.
Yeah. I think it's I think a high level is a good good way to look at it, basically.
Yeah. So then, do you wanna explain a bit what is Shutter Network? Yeah. We'd love to. Yeah. So,
it's at the very high level, it's very simple. It's basically it's just like saying we encrypt transactions, initially, and then we we reveal them, after the order is sort of finalized and after the after the block producer has committed to this block. And so so essentially, users encrypt transactions. They get batched. They get signed by the block producer. Again, could be validator, sequencer, whatever. And only after the that, their transactions get revealed. So basically, the the raw producer can't see in the transaction, so they can't sensor a front run. It's kind of the the simple, version of it. And the the more complicated, why it's com more complicated than this is essentially you cannot, use your own private key to, sign to to, to encrypt transactions as a user because then each user would have sort of a free option not to decrypt afterwards, which is which would be to break the system again. So essentially, we have a committee based, encryption and decryption, mechanism using threshold encryption. So threshold encryption is, k an encryption scheme, which is kind of like Shamir secret sharing, but instead of, everyone like, you have n out of n. It's basically you have any k out of n, we call them keepers or key shareholders basically that need to collaborate to generate the the encryption or decryption key. That makes sense? So, yeah, we have this committee based threshold encryption, DKG, a distributed key generation protocol, basically in order to ensure, that the transaction actually gets decrypted. So and also in order to decentralize that step. Right? Rather, you don't wanna trust any single entity to encrypt and decrypt. You wanna have, decentralization at that at that level there.
Hi, everyone. If you're enjoying this episode so far, be sure to subscribe, leave a review, share with a friend, and join the crypto leftist communities on Discord or Reddit, which you can find links to in the show notes. If you join the interview or find the content I make important, you can pitch into my efforts starting at $3 a month on patreon.com/theblockchainsocialist to help me out. It really helps since making this stuff isn't free in terms of money or time, And as a patron, you'll get a shout out on an episode and access to bonus content like q and a episodes where you can submit and vote on questions you'd like me to answer, and I'll give my thoughts in roughly twenty to thirty minutes. In the last bonus episode, I reviewed one of Vitalik's latest papers he coauthored detailing his vision for decentralized society society and use cases for soulbound tokens. Of course, I'll still be making free content like this interview to help spread the message that blockchains don't need to be used to further entrench capitalist exploitation if we put our efforts into it, and so if that message resonates with you, I hope you'll consider helping out. Do normal block validators or miners accept encrypted transactions usually?
No. Yeah. Normally, you wouldn't necessarily normally, you can't execute them. Yeah. Or you yeah. You wouldn't, do that. Yeah. So so wherever we implement it, it depends a little bit. It depend if you wanna implement it at the l one level, then it would mean changing the transaction flow then. Essentially, changing the client such that the the miners would accept, encryption actions, then wait for the decryption step, and then, and then, execute. So and then yeah. And then we don't, we think that's a while out. Right? This l one. So so it's gonna be very hard to, implement it at the l one level, for now. So I think there's there's very good ideas and, with, so Martin from NOSIS, he's he's very he's, very interested in this, and he's, we're collaborating with him a little bit to make the case for this at the l one level. So it's a combination of research, but also maybe sort of, Gnosis chain can could theoretically adopt this much earlier than someone like, someone like the Ethereum, client spec. So, so that's a track we are definitely pursuing, with Martin. The for for our core sort of development, effort, though, we would at the moment, we would say the most sense it makes does it make to implement this aforementioned kind of threshold encryption mechanism at the l two level. Because a, l two is gonna be where all the trading activity probably happens. We need it to scale the theorem. And b, the l twos provide this perfect kind of, ecosystem for you can span up a new l two, experiment with it,
much easier than on the on the l one level. Sort of. So l twos are potentially, like, the route that you guys want to potentially take to experiment with?
Yeah. With the technology. Not just potentially, but we're kind of, like, 90% finished. I'm implementing it into into various kind of, to Fox. Yeah. So so we're definitely taking that path for now. Yes. And and also looking at other things there, but that's our that's our main kind of focus. Right. So I think that it's I imagine also just generally
easier since l twos are more I mean, they have more standardized, like, clients, I guess, or, like, in in the way that that they're, they're set up with, like, the block validators are. But then if you wanted to implement that into the Ethereum main net, you would have to work with all the different clients. Yeah. Yeah. Or convince a lot of people, convince
kind of A lot more work. Yeah. So it's yeah. In our view, it's more complicated kind of from the technology perspective. And, again, you have to convince a lot more people. Yeah. But, for us, yeah, it's definitely gonna worth exploring this path, as well. Even if just as a even if we're in this path, we are we can just make the case that long term, this idea is is is viable even at the l one level. Right? Kind of like Flashbots is Flashbots is advertising for PBS or is Flashbots is, pushing this idea of PBS, which is, a couple of years out probably until it gets really implemented. Whereas whereas on the on the kind of, like, practical level, they already have Flashbots protect or MEV boost, which is already happening right now. Yeah. So so they have so they they can, yeah, they can be engaged in the in the longer term discussion while also having some some practical, things out, earlier.
And so I know that you guys are also sort of experimenting with, this technology using snapshots. So which is a a common application for DAOs or whatever organization to do voting, off chain. And you guys I think one of the things that you guys are working on is shielded voting. So, like, voting, without sort of, like, giving away what you're voting for.
Yeah. Exactly. Yeah. Thanks for being that bad. So so, essentially, we it's not an MEV. It's not an MEV problem that we're solving there. It's basically a different problem, but that we're using the same threshold encryption, technology, the same DKG for, that we use for for our MEV, kind of efforts. So essentially, it's, it's a topic it the voting topic. So encrypting DAO votes during the voting period and then revealing after the voting period is over. So it's not a full privacy solution, I would say. Right? Because afterwards, it gets it gets revealed. But it's more to do with preventing information asymmetry, basically. Yeah. So, so right now, if you vote and you get influenced by the the current, what is the current status of the vote, that's not a good thing. That that can create weird incentives of people not really voting to the true kind of, what it what you actually believe. So yeah. And we think kind of per default, just like in real elections, you should have shielded voting. It should you should it should be shielded until the voters is over. Yeah? So yeah. And the the first kind of most obvious partner to develop this, with was Snapshot because they're kind of like the the off chain DAO voting solution for basically 90% of all DAOs, basically. And, they've been super helpful in in implementing it on their front end side, where now you can in the admin or very soon, you'll be able to in the admin settings of your snapshot space, you can choose, shutter, as a privacy option kind of. And then all, DAO, all new DAO votes from then on will be, shielded. And you see the little locks too that they're encrypted, again, until it's gets decrypted. Yeah. So it's, yeah. It's not really our MEV, sort of efforts, but I think it's it overall fits our our our overall mission very well, which is, using cryptography and cryptoeconomics to kind of make the markets more fair and efficient, basically. So we think in that in that broader vision, it fits in very well because it improves the fairness, of these voting systems that, yeah, that that are currently also a little bit lacking behind of of what's, what's what real voting systems can maybe achieve. Yeah. So so if we can make the the point with with, preventing front running, and also preventing some some like, some unfairness in in voting systems, I think that's that's too little nice, kind of building blocks towards this overall crypto vision of, hey. We need we need more fair as you said said in the beginning. Right? We need markets. We need we need, incentive systems, voting systems, market mechanisms that are sort of, like, a 100 times more efficient and a 100 times more fair than what's than what the legacy finance world offers in order to really make the case that you should switch. Right? Because yeah. I think I think the public has really lost the trust in crypto, and they're they're thinking, well, this is this is a free fall, and people are front running me, or it's all broken. Privacy isn't even there, and so like this. So I think that's a that's a that's something it's an overall overarching goal that we need to At the very least, like,
the shielded voting, is a good use case for, threshold encryption. And that's I think it what's interesting to me is that it shows, like, one, you know, crypto primitive threshold encryption is applicable in many different areas, which makes it, like, a very a very malleable tool in in ways that I think, some people sort of maybe underestimate or think that sort of, like, in a way that people try to maybe map, I don't know, cryptocurrency or or blockchain as as as one way or doing one thing or NFTs as just being NFT or crypto art or whatever. It kinda shows it's just like another example, I think, of the the malleability and, like, the the if if we just sort of limited limit ourselves in thinking of, a lot of these different types of, mechanisms as, like, doing x or it's just meant for x, then we sort of lose a lot of what what it could possibly do. Yeah. And Tetra encryption
Tetra encryption is, I think a cool sweet spot of I mean, some of these more advanced cryptography mechanisms such as, like, zero knowledge proofs or let's say, fully homomorphic encryption, FHE or some of these. Amazing. But it's not a 100% clear how well they how scalable they are and how safe they are sort of in practice. Whereas, but yeah. Whereas, threshold encryption is at the sweet spot where it's it's basically very understood technologies. Basically, just a, an advanced it's very advanced form of Shamir secret sharing, which is has been in use for for decades. Yeah. So, so I think it's a nice sweet spot of of advanced cryptography, but let's say not, like, obscure and kind of, like, weird cryptography that we don't even understand. Yeah. Nice.
Well, thanks a lot for coming on and sharing your knowledge about this, crazy world of MEV and what you guys are doing at Shutter Network and explaining threshold encryption. I'm sure people will now may want to, read a little bit more on it since this was just a primer and was just, like, the the very basics. But there's some, like, very interesting stuff online that you can find, if you want to read about it. But, would you mind maybe leaving us with where people can keep up with you and Shudder Network? Yeah. Yeah. So in the Oh, one way to follow us is probably definitely Twitter.
At project underscore shutter. That's the best and easiest way to We're very Twitter focused, I would say. From there, you can also then join our Telegram group. And and if you say read about, sort of what we're doing, I think from there, you can also link to our blog. Or you can go to shutter.network, and there you can go to the blog. And the blog is mixed between our kind of, what we're working on. But also we have a, kind of MEV explainer series, which, which, would serve as one good kind of entry point. So there you can find it. So we have the two first, blogs on this. I think that one is coming out very soon, where we're trying to explain MEV, not for, like, completely sort of, like, not for sort of anyone, but let's say someone who's already interested in crypto or who comes from the, let's say, who comes from the from the legacy finance kind of high frequency trading or algo trading world, he should be able to very easily, or she could very easily pick up this, the the the threads there and and learn about MEV in in in smaller steps kind of in more and more, in a more educational way, I think, with more examples than than our usual content, which is kinda assumes that you know what MEV is basically. Yeah. I'll, link some of those in the, episode description. Awesome. Thank you so much, sir. Alright. Thanks a lot. Perfect. Thank you. Yeah. And it was very I think it's, yeah, you as a the blockchain socialist, I think it's a very I mean, VK is is one of these topics where it can be very political or it can I think it can bring out all sides on the political spectrum and that you could talk about something concrete, politically, which sometimes maybe it's very abstract? So I think it's a very nice area to discuss also politically. Whereas also I think on the other side, it doesn't have to be politically, because I think ultimately, hopefully we all
optimize towards towards kind of the welfare of all participants in this crypto space. Yeah. So yeah. Right. Yeah. I mean, I'm trying to just sort of because I know it's such a complex topic and there are so few people who are really, really knowledgeable about it that I'm trying to have the space. I have, like, some doubts about, like, MEV and, like, as far as, like, what possible solutions there are. But I'm at the moment of just, like, trying to learn, from those who know more than me about it and, like, try to see
you know, try to figure out more and more where I stand. Yeah. And the more engaging with it or kind of making statements about it or discussing it, I think will, no matter which direction people are thinking about it, I think will ultimately really help educate people about all kinds of things. So, yeah. So I think it's one of these nice topics where I think we should educate people more about, and it brings out very interesting topics and new kind of ways of looking at things or furthers the political discussion as well, maybe.