Flashbots

Flashbots is a research and development organization focused on maximal extractable value (MEV), the profit that can be made by choosing which transactions go into a block and in what order. Founded in 2020, it builds open-source software that gives searchers, block builders and validators on Ethereum a more orderly way to compete for that value, with the aim of reducing harmful side effects such as network congestion, failed transactions and pressure towards centralization.

Its best-known products are MEV-Boost, software that most Ethereum validators run to buy blocks from specialized builders, and Flashbots Protect, a service that lets users send transactions privately rather than through the public mempool. Flashbots also publishes research and has proposed designs for decentralized block building. It is not a company that runs the network; its tools are optional, but they have become a central part of how the Ethereum blockchain produces blocks.

Picture a busy bus stop where the driver can choose which passengers board first, and some passengers will pay extra to jump the queue. Before Flashbots, people fought for those places by shouting over each other, which jammed the stop for everyone. Flashbots set up something like a sealed-bid ticket office beside the stop: passengers hand in bids privately, and the driver simply takes the best offer.

On Ethereum, the "passengers" are transactions, the "driver" is the validator who proposes the next block, and the bids are payments for a good place in the block. Moving the bidding into a private, orderly system cut down the spam that crowded the network, but it also created new middlemen whom users must trust.

By 2020, bots on Ethereum were competing to profit from arbitrage, liquidations and front-running by repeatedly outbidding each other on gas fees, a practice known as priority gas auctions. These wars clogged blocks and raised fees for ordinary users. A research paper in 2019 had described the problem and coined the term miner extractable value. Flashbots formed in 2020 to bring these auctions into the open and reduce their damage.

In early 2021 it released MEV-Geth, a modified version of the Geth client that let miners accept "bundles" of transactions from searchers through a sealed-bid auction. Adoption by mining pools was rapid. When Ethereum moved to proof of stake in September 2022, Flashbots launched MEV-Boost, adapting the idea to validators.

• Searchers. Independent traders run bots that spot profitable opportunities, such as arbitrage between decentralized exchanges, and package transactions into bundles with a payment attached.
• Builders. Specialized block builders collect bundles and ordinary transactions and assemble the most valuable block they can.
• Relays. Relays act as trusted middlemen. They receive blocks from builders, check them and pass only the block header and bid to validators, so validators cannot steal the contents.
• Validators. The validator chosen to propose the next block picks the highest bid and signs the header, after which the full block is revealed and published.

This arrangement separates the job of building blocks from the job of proposing them, an idea known as proposer-builder separation. It lets ordinary validators earn MEV income without running complex strategies themselves.

Flashbots Protect is a remote procedure call (RPC) endpoint that users can add to their wallets. Transactions sent through it go privately to builders instead of the public mempool, which protects them from being copied or "sandwiched" by bots and avoids paying for transactions that fail. Flashbots has also worked on SUAVE, a proposed shared system for ordering transactions across many chains, and on research into keeping block building decentralized and private.

• Centralization. A small number of builders and relays produce a large share of Ethereum blocks, which concentrates power over which transactions are included.
• Censorship. After the US Treasury's Office of Foreign Assets Control sanctioned a crypto mixing service in August 2022, the Flashbots relay filtered out transactions involving sanctioned addresses. Critics argued that this weakened Ethereum's censorship resistance, and the share of blocks produced through filtering relays became a closely watched measure.
• Trust in relays. MEV-Boost depends on relays behaving honestly, and outages or bugs in relay software have caused validators to miss blocks.
• Legitimizing MEV. Some argue that making MEV extraction efficient entrenches it rather than reducing it, while supporters respond that it existed anyway and is better handled openly.

Ethereum researchers have discussed building proposer-builder separation into the protocol itself, which would reduce reliance on outside relays. How MEV should be handled, and whether its profits can be returned to users, remains an active topic across decentralized finance, where trades on a decentralized exchange are a main source of extractable value.

• Flashbots