"MEVpool: A New Approach to Mitigate Blockchain Centralization"

Miner Extractable Value (MEV) has emerged as a significant challenge for blockchain-based systems, posing a fundamental risk to their security and decentralization. The original design of blockchains incentivized miners to earn revenue through block subsidies and transaction fees. However, the introduction of more complex contracts and protocols has created new revenue streams for miners, leading to centralization pressures and potential censorship issues.

Ethereum, with its complex smart contracts, has been particularly affected by MEV. In response, the Ethereum community has proposed solutions such as Proposer Builder Separation (PBS), which aims to mitigate centralization risks by separating the roles of block template creation and block proposal. However, in practice, PBS has not been effective in preventing censorship, as a few dominant builders can still influence miners' decisions.

MEVpool, a proposal by Matt Corallo and 7d5x9, seeks to address the MEV issue by modifying the PBS approach for Bitcoin. Unlike PBS, MEVpool allows miners to maintain control over block template construction while outsourcing the selection of transactions that optimize MEV extraction. This is achieved through marketplace relays that host order books, where MEV extractors can post their proposed transactions and fees.

Marketplace relays support sealed and unsealed orders, with sealed requests revealing the transaction to the miner only after they mine a valid block. Two methods exist for relay operators to validate transactions: acting as a trusted third party or using a Trusted Execution Environment (TEE) to handle encrypted sealed bids. In both cases, miners receive fees from MEV extractors after successfully mining a block.

The end result of MEVpool is likely to be similar to PBS on Ethereum, with a few large marketplaces attracting transaction submissions and potentially leveraging their position to influence miners' decisions. While MEVpool does not completely eliminate centralization risks, it does help mitigate some of the worst effects of MEV by providing miners with more control over their transactions and reducing the need for censorship.