A popular scheme a number of groups are working on building are “rollups” on bitcoin. These are sidechain systems where the transaction data for the sidechain is embedded in the bitcoin blockchain itself. Because these systems can have arbitrarily expressible smart contracts, they are likely to have the potential for advanced MEV extraction similar to what we see on ethereum today. However, in most cases, such systems do not create MEVil in bitcoin. In most rollup systems there is a single or small group of “sequencers” which select the transactions that enter the rollup as well as their order. Thus, the sequencers have the exclusive ability to extract MEV and bitcoin miners are not able to use their transaction selection or ordering power to influence the rollup‘s transactions.
-Some rollup systems, referred to as “sovereign rollups”, however, give bitcoin miners the ability to directly select and order rollup transactions. This runs substantial risk of creating MEVil, and in fact if we see deployment of large-scale naive sovereign rollups I believe bitcoin may suffer a terrible fate. Still, sovereign rollup developers have a few easy tricks which can substantially reduce MEVil risk. First of all, sovereign rollups can remove the ability for miners to order rollup transactions by randomizing the order keyed using the bitcoin block hash. Thus, for miners to influence the order of rollup transactions they must be willing to fully discard valid bitcoin blocks, forgoing potentially substantial profit. Secondly, sovereign rollup developers can randomize transaction ordering across multiple blocks, ensuring single bitcoin miners cannot censor rollup transactions, further reducing their ability to materially extract MEVil. While this may delay rollup transaction confirmation times somewhat, I’d strongly encourage rollup developers to consider whether there is a genuine material difference between users waiting for six confirmations and users waiting for seven, eight, or nine confirmations.
+Some rollup systems, referred to as “based rollups”, however, give bitcoin miners the ability to directly select and order rollup transactions. This runs substantial risk of creating MEVil, and in fact if we see deployment of large-scale naive based rollups I believe bitcoin may suffer a terrible fate. Still, based rollup developers have a few easy tricks which can substantially reduce MEVil risk. First of all, based rollups can remove the ability for miners to order rollup transactions by randomizing the order keyed using the bitcoin block hash. Thus, for miners to influence the order of rollup transactions they must be willing to fully discard valid bitcoin blocks, forgoing potentially substantial profit. Secondly, based rollup developers can randomize transaction ordering across multiple blocks, ensuring single bitcoin miners cannot censor rollup transactions, further reducing their ability to materially extract MEVil. While this may delay rollup transaction confirmation times somewhat, I’d strongly encourage rollup developers to consider whether there is a genuine material difference between users waiting for six confirmations and users waiting for seven, eight, or nine confirmations.
-I’d also encourage developers, Bitcoiners, and everyone to vote with their feet - if a rollup system introduces material MEVil risk to bitcoin, simply use an alternative system - if you don’t, the utility of that system is going to eventually be ruined by increased bitcoin miner centralization anyway. In this case, centralized and federated rollups are much more clearly safe, and decentralized or sovereign rollups should be carefully considered before using them!
+I’d also encourage developers, Bitcoiners, and everyone to vote with their feet - if a rollup system introduces material MEVil risk to bitcoin, simply use an alternative system - if you don’t, the utility of that system is going to eventually be ruined by increased bitcoin miner centralization anyway. In this case, centralized and federated rollups are much more clearly safe, and based rollups or ones with a "force-inclusion" mechanism should be carefully considered before using them!
-Another common example raised as MEV on bitcoin is the inclusion of nonstandard transactions or, more broadly, any transactions which reach a miner outside of the public mempool. While this indeed introduces strong centralization pressure for larger miners to offer this as a service, which is absolutely MEVil, we have not yet seen material demand or revenue from such transactions. Indeed, as mentioned above, miners have an incentive to ensure transactions received via private relay reach the public mempool where possible to allow for public RBF bidding. While there is certainly demand for nonstandard transaction inclusion as a novelty, it is unclear if this market will grow in the long term. Further, Bitcoin Core can, should, and generally does allow any transaction as standard, with restrictions only for transactions representing denial-of-service attacks or when the inclusion of a transaction makes Bitcoin Core unable to accurately calculate competitive back templates. As Bitcoin Core continues to improve, the demand for any nonstandard transactions will continue to decline, thus reducing the profit potential of any MEVil extraction.
+Another common example raised as MEV on bitcoin is the inclusion of nonstandard transactions or, more broadly, any transactions which reach a miner outside of the public mempool. While this indeed introduces strong centralization pressure for larger miners to offer this as a service, which is absolutely MEVil, we have not yet seen material demand or revenue from such transactions. Indeed, as mentioned above, miners have an incentive to ensure transactions received via private relay reach the public mempool where possible to allow for public RBF bidding. While there is certainly demand for nonstandard transaction inclusion as a novelty, it is unclear if this market will grow in the long term. Further, Bitcoin Core can, should, and generally does allow any transaction as standard, with restrictions only for transactions representing denial-of-service attacks or when the inclusion of a transaction makes Bitcoin Core unable to accurately calculate competitive block templates. As Bitcoin Core continues to improve, the demand for any nonstandard transactions will continue to decline, thus reducing the profit potential of any MEVil extraction.
More recently, out of band payments to miners have become popular again, allowing individuals to pay large pools for the inclusion of their transaction(s) using payments outside of the normal bitcoin transaction fee. This can create substantial MEVil but only if the out-of-band payment is offered directly to a single or group of miners. Any kind of out of band fee payment which is easily claimable by any miner does not contribute to MEVil-induced centralization, and thus open protocols for this are important. Further, while out of band fees have been commonly available on bitcoin before, they have never represented a substantial portion of miner revenue, and with technologies like Lightning and RBF (very slowly) becoming more popular in consumer bitcoin wallets, the need for out of band payments should further decrease.
-Finally, some individual coins on chain have developed collector value. Notably, coins freshly mined in coinbase outputs in certain blocks (especially after difficulty or block subsidy adjustments) have often been valued at higher than their Bitcoin amount. While this has negative implications on fungibility, the extraction of such additional value can also be considered a form of MEVil. After all, claiming this value may require additional investment in human capital to evaluate and participate in “rare sats” marketplaces. The long-term value of these collectors items remains unclear, and valuing them is, correctly, often considered antisocial by Bitcoiners who care about the long-term sustainability and performance of the bitcoin system. Luckily, such "rare sats" that (may) have material value only occur in very few blocks (currently those every 4 years after difficulty adjustments), reducing the total impact it can have on miners.
+Finally, some individual coins on chain have developed collector value. Notably, coins freshly mined in coinbase outputs in certain blocks (especially after difficulty or block subsidy adjustments) have often been valued at higher than their Bitcoin amount. While this has negative implications on fungibility, the extraction of such additional value can also be considered a form of MEVil. After all, claiming this value may require additional investment in human capital to evaluate and participate in “rare sats” marketplaces. The long-term value of these collectors items remains unclear, and valuing them is, correctly, often considered antisocial by Bitcoiners who care about the long-term sustainability and performance of the bitcoin system. Luckily, such "rare sats" that (may) have material value only occur in very few blocks (currently those every 4 years after subsidy adjustments), reducing the total impact it can have on miners.
While there are many risks on the horizon which may introduce MEVil in bitcoin, thus substantially risking the long-term censorship resistance (and therefore value) of bitcoin, there is no reason yet to fear that such an outcome is inevitable. Indeed, while MEV on bitcoin is inevitable and here today, “MEV” is a largely useless term for describing our censorship resistance and centralization concerns. Engineers developing, and users selecting, platforms which add additional expressivity to bitcoin must carefully consider the risk of MEVil these systems may introduce. Opting to build or use systems which introduce MEVil to bitcoin must thus be avoided, and considered antisocial, or the long term value in these systems and the bitcoin system itself may be destroyed.
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