KAIZEN

Miner-extractable value (MEV) and front running are widely recognized to be among the final unsolved fundamental issues in the blockchain space. There are now hundreds of millions of dollars of documented #MEV, most of which is tremendously harmful for users and traders. First we need to define the problem, understand it better. ❓What is Miner Extractable Value? On April 10, 2019, a group of eight research fellows embarked on an exploratory mission into the 'Dark Forest' of Ethereum. Their goal was to navigate through the complexities and devise a strategy that would bring clarity and solutions to the issue of maximal extractable value (MEV) for the benefit of the entire Ethereum community. 💢Miner Extractable Value (MEV) is a concept within blockchain ecosystems, particularly in #Ethereum, that refers to the profit miners can make through their ability to arbitrarily include, exclude, or reorder transactions within the blocks they produce. This profit comes from the miners' unique position to take advantage of opportunities such as: >Arbitrage: Profiting from price differences for the same asset on different exchanges. >Sandwich Attacks: Placing transactions above and below a large trade to benefit from price slippage. >Front Running: Executing a transaction first based on the knowledge of upcoming transactions that will affect prices. >Back Running: Placing a transaction immediately after a known future transaction to capitalize on the price impact. >Censorship: Choosing not to include certain transactions, which can be profitable in certain game-theoretic scenarios. ➡️A significant portion of #MEV comes from front running, a practice considered illegal in traditional financial markets but largely unregulated in the cryptocurrency world. ▪️Front runners monitor the network for lucrative transactions and then execute their own transactions first by offering higher gas fees, utilizing extensive global network infrastructure, producing the blocks themselves, or incentivizing miners through private arrangements. --------------------------------------------------------- Let me explain with an anology; Auctioneer's Advantage Consider an auction where the auctioneer has the power to decide the order of bids and can even place their own bids. If they see someone willing to pay a high price for an item, they could quickly place their own bid just before, winning the item and then selling it to the highest bidder for a profit. In Ethereum, miners can see all the pending transactions (bids) and have the power to decide the order they're included in the blockchain (auction). They can exploit this by inserting their own transactions to profit from the information they have about others' transactions. ---------------------------------------------------------- Traders on decentralized exchanges are the most common targets of front running. This practice leads to them receiving less favorable prices, undermining the fair compensation for the market insights their trades should provide. ▪️With these issues; MEV can lead to negative externalities such as network congestion and unfair trading environments, and can compromise the integrity and fairness of the blockchain. The Solution > It should be decentralized, as centralization would negate the fundamental purpose of blockchain technology. > It must operate efficiently, ensuring that it doesn't significantly increase gas costs and thus keeps transaction fees manageable. >The solution should avoid necessitating changes to the core protocol. While ideally, front running would be tackled at the foundational level, protocol amendments can be time-consuming to enact. And the solution stands here as; Shutter Network @project_shutter Shutter Network , an open-source project that aims to prevent front running on #Ethereum by using a threshold cryptography-based distributed key generation (DKG) protocol developed by @_brainbot Shutter allows users to send encrypted transactions in a way that protects them from front runners on their path through the Dark Forest (the metaphorical hunting ground of front runners that each transaction must cross) For the sake of clarity, let me explain the DKG process. Distributed Key Generation is a cryptographic process where multiple parties collaborate to create a public/private key pair in a way that no single party knows the entire private key. The main advantage of #DKG is that it enhances security: since the private key is never assembled in one place, it's much harder for an attacker to compromise the key Shutter uses a threshold cryptography-based distributed key generation (DKG) protocol The mechanism used by Shutter can be implemented into various layers. The first instantiation they built is a simple drop-in solution for smart contracts at the application level, which is gas efficient and doesn’t require L1/L2 protocol changes. 🗝️Architecture of Shutter Central to the Shutter system is a decentralized autonomous organization (#DAO), which oversees the network's operations. This DAO's primary responsibility is to appoint a group of specialized nodes known as keypers. These keypers are tasked with creating cryptographic keys that users utilize to encrypt their transactions. A suite of smart contracts is employed to orchestrate both the key creation procedure and the sequence of steps involved in executing transactions. ➰Partners Rollups can now start integrating an encrypted mempool using threshold encryption for malicious MEV protection and real-time censorship resistance. Shutter Roadmap 2024 ▪️The year 2024 began with substantial advancements in the Shutter ecosystem. >They released the blueprint for a Shutter DAO, and shortly thereafter, the community initiated Shutter DAO 0x36. In recent weeks, they have made significant announcements about partnerships with EigenLayer, Mode, and Espresso. 🗝️And also Shutter and its Keypers might adopt more advanced cryptographic techniques, particularly focusing on Fully Homomorphic Encryption (FHE) and Multi-Party Computation (MPC). (Threshold encryption is already a basic form of MPC.) ----------------------------------------------------------- Endgame; Their aim for Shutter to become the universal encrypted mempool solution for both #Layer1 and #Layer2 platforms. ---------------------------------------------------------- PRESALE Based on a public process, in February 2024, Shutter DAO 0x36 $SHU at $0.04 per token. These tokens 10% unlocked on the 18th of March and the rest over the following 24 months. And they recently raised via LBP Their LBP close price was $0.3 For further info about economics; blog.shutter.network/shutter… And also check; blog.shutter.network/ For now they are sitting at 0.15 and mc is around 10m dextools.io/app/en/ether/pai…