A Flash(bot) in the Pan: Measuring Maximal Extractable Value in Private Pools

TL;DR

This paper evaluates the effectiveness of Flashbots in reducing MEV-related issues on Ethereum, revealing high centralization and increased miner profits despite its goals.

Contribution

It provides the first empirical measurement of Flashbots' market share, centralization, and impact on miner profits and MEV extraction.

Findings

Flashbots miners control over 99.9% of Ethereum hashing power.

Miner profits have more than doubled with Flashbots.

Mining remains highly centralized, with over 90% of Flashbots blocks from two miners.

Abstract

The rise of Ethereum has lead to a flourishing decentralized marketplace that has, unfortunately, fallen victim to frontrunning and Maximal Extractable Value (MEV) activities, where savvy participants game transaction orderings within a block for profit. One popular solution to address such behavior is Flashbots, a private pool with infrastructure and design goals aimed at eliminating the negative externalities associated with MEV. While Flashbots has established laudable goals to address MEV behavior, no evidence has been provided to show that these goals are achieved in practice. In this paper, we measure the popularity of Flashbots and evaluate if it is meeting its chartered goals. We find that (1) Flashbots miners account for over 99.9% of the hashing power in the Ethereum network, (2) powerful miners are making more than $2\times$ what they were making prior to using Flashbots, while non-miners' slice of the pie has shrunk commensurately, (3) mining is just as centralized as it was prior to Flashbots with more than 90% of Flashbots blocks coming from just two miners, and (4) while more than 80% of MEV extraction in Ethereum is happening through Flashbots, 13.2% is coming from other private pools.