This crazy niche? That's, generated over three quarters of a billion dollars in its lifetime? Well, something called minor, extractable values or mev for short, and actually you can kind of see it rebranded on this page as maximum extractable value so uh.
What does that mean? Well, essentially, it's like free money, that's sitting on the blockchain that can just be taken or extracted by somebody if they become aware of it. So let me explain so out there on the blockchain there's.
All these scenarios, where you have cryptocurrency that can essentially just be moved around for a profit. Okay, so one example is an arbitrage transaction. Where you see your price differences on cryptocurrency exchange, maybe you know a cryptocurrency sells for 100 on one exchange and you know it sells for 101 on a different exchange, so you could just buy it and then sell it for a one dollar profit for every single Unit of cryptocurrency that you did that for so this is value just sitting out there in the blockchain that you, you know as a developer or somebody who could build a bot could take advantage of this, and this is a case where you don '
T really have to hold any cryptocurrency necessarily in order to take advantage of this opportunity. If you're doing this with something like flash loans, for example, and so these opportunities exist all over the place and some really clever people figured out that you could essentially listen for other people who are trying to jump on these opportunities.
And actually, you know cut in front of them in line when they're trying to execute this transaction on the blockchain and that's got to do with ethereum's mempool. Basically, they can just jump in front of your transaction and tell it to do the exact same thing, but essentially use their account address instead of yours and replicate your transaction and take the profit.
So let me explain what i mean by that. So this is something called ethereum's mempool. So whenever you go make a transaction on the ethereum network, let's say you use adap exchange like uni, swap, for example, and you connect with metamask, and you sign your transaction and say confirm, swap yes, i want to trade this token, then you Know you have to wait a little while before your transactions, actually, you know, confirmed the blockchain.
So during that period it's. Actually a setting in the mempool just stands for memory pool and what people figured out is. Essentially, you know you could listen for transactions when they were entering into the mempool and see what kind of instructions were contained inside the you know, transaction itself, like hey trade tokens on uni, swap maybe take advantage of this arbitrage trade opportunity and essentially just take your Transaction, the bare instructions, but change the instructions slightly to where you know they put in their own account account addresses.
So if you're going to do an arbitrage trade here, instead of sending the profits back to you, your smart contract or whatever, they could just change the instructions to essentially send the profits back to themselves and then pay a higher gas price.
So that their transaction was included before yours, because that's, how ethereum works, whoever pays the highest gas price gets into the block first, or at least they're incentivized. To do this with miners, and essentially they would just beat you to the transaction and extract this value away from you.
So hence like minor extractable value, and so that sounds really annoying. Then that's because it is and it's caused a lot of problems for the ethereum network over the past year, so particularly with the gas prices.
So a lot of people complain that ethereum's. Gas prices are too high. It's too expensive to use. I want to go and try to token on uni swap, but you know it's too expensive. It prices me out of the trade.
Well, there's. Lots of reasons for why the gas prices are so high on the ethereum network or why they've been high in the past. They're, of course, based on supply and demand, but part of the demand side has been driven by people who are doing this exact same thing, basically running these bots to do front, running and lots of other things where they're.
Taking advantage of this minor retractable value and just clogging up the network, so that's where flashbots comes into play. So what is that? Well, basically, this is a project that is trying to help this problem on the ethereum network.
Okay, so they recognize this, you know thing of minor extractable value here and their philosophy as well. This is not really going to go away, so let's, try to create a way for uh to actually incentivize people to fight this and do it in a different arena so that it doesn't actually clog up the ethereum network.
Okay, so basically they realize this minor attractable value. Uh. You know problem's not going to go away. There can be people who are trying to take advantage of it, but instead of clocking up, you know the mempool and everybody.
Just like you know, burning ether trying to get their transactions into the blockchain. Then let's create a separate environment over here. Where we can do a lot of this stuff, okay and we'll. Actually, you know number one give more clarity about what's going on in here people talk about the ethereum mempool being like a dark forest, so their mission is to illuminate the dark.
Forest actually show people. What's going on inside? Here and so that actually creates new incentives for other people to you know democratize this, to where more people can compete for these transactions kind of in a different arena, and then let people actually make money by doing that and fight some of this in a different Environment and it can be kind of a win-win, so we get some as activity without overloading the mempool.
We let other people compete on this and make money over here and ever since this has been implemented, it's really helped a lot with the gas fees that have, you know, plagued the ethereum network, and so, if you want to see the growth On this over time, you can actually go to this dashboard here, explore.
flashbots.net to see this uh take off and how much minor acceptable value has been. You know, captured in this period of time. It looks like the statistics are a little bit out of date. I think they uh are not properly updating right now, but you can see this extracted by different protocols.
A lot of this has been taking place on uni swap uh sushi swaps. These different decentralized exchanges, the different types of things you can do with minor extractable value arbitrage is by far the largest category, with 97 liquidations for defy and then a combination of arbitrage and liquidation.
So how would you get your hands dirty to? Actually, you know try out this opportunity yourself. Well, you can start by going to docs.flashbots.net, okay and first just uh kind of take a look at the uh.
How does it work section? So you see a recap. What we're just talking about here so flashbox auction, provides a private transaction pool, plus a sealed bid block space auction mechanism which allows block producers to trustlessly outsource the work of finding optimal block construction, and so that's.
What you're participating in here, and you can see that they outlawed the same problems that we just talked about here, um, but so let's, actually look at the techno architecture. So what would you need to build in order to create this? So you see, the technical architecture here relies on three major pieces, so a searcher, a relayer and a miner, and so this searcher right here is a key part of the architecture that you would want to use.
If you're gonna jump on one of these opportunities, so you know, researchers are basically for ethereum bot operators looking for fast and risk-free access to block space. If you try to like do arbitrage in the past, and you're like worried about someone just stealing that transaction in front of you well the searchers and this whole flashbots ecosystem that helps you fix that problem.
So same thing, if you've been trying to trade on uni swap, for example, and you want sort of a private environment to do that, at least before your transaction gets included in the blockchain so that you don't.
Have you know front runners who are trying to you know get in front of your trades? This is also a pretty good example, so those are the top two. Let's. Talk about how to tie it all together. So you know i've talked in this channel before about how you can create trading bots, you know, take advantage of opportunities like this uh, so that's.
The first thing that you need is basically an opportunity, so you have to identify what that strategy is going to be. Is it arbitrage trading? Are you trying to exploit cryptocurrency prices on different exchanges talking about buying on one up, you know, exchange and selling on another.
Are you going to try to do liquidations for delinquent loans out there, where essentially, you're, seeing you know, deaths that need to be repaid and taking out you know, flash loans to cancel out those debts that's? The first thing is picking out what strategy you're, going to do so.
Number two is, then you have to find a way to discover those strategies. So let's just take arbitrage. For example, you need to create some sort of watcher. This would essentially search for those cryptocurrency prices on different exchanges.
You might just plug in lots of different cryptocurrencies and see what the prices are and then do the math. Is there currently a difference? This tends to happen in times of you know, extreme price volatility when different exchanges get out of sync and then next you want to create some custom smart contracts to actually you know, implement these strategies.
So if you're going to do arbitrage trading across two different cryptocurrency exchanges, you would want to implement a smart contract that facilitates that trade on different cryptocurrency exchanges.
You know, does the flashlights all that type of stuff, then the last thing is you want to plug in this key flashbots feature, because it gives you an environment where you can. You know, uh execute those opportunities to help prevent.
You know front running where somebody's, not going to jump in front of you and actually you know, change the instructions for the transaction and beat you to the punch once you've identified it, and so, when you'Re ready to do that, you can look at the flashbots documentation here under the searchers, the quickstart.
You can see how the flashbots auctions work, how to use your first bundle. Okay, there's, different libraries for it there's. Ethers.Js there's, uh web3.js python version of web3 also some go examples as well.
You can see how to add them to your projects right here, and you can also browse uh the entire list of their projects on their github. Here it's, just github dot com forward, slash flashbots! Again, you can see the different uh spot stories here.
You can see the minor extractable value, the geth demo. You can see examples of simple arbitrage here and lots more things to get. You started, and so that's, an overview of minor extractable value that's.
How people have been able to capture you know over three quarters of a billion dollars in the lifetime of this opportunity, and that's, how it works, and those are some examples of how you can get your hands dirty today with this.
So if that's, something that you're interested in, you all want to see like more detailed content on how this actually works, like. Let me know down in the comment section below okay, so that's. All i've got as always smash that, like button down below for the youtube algorithm subscribe to this channel, if you haven't already, that really helps these videos out.
So the more you can learn about blockchain. If you're as fascinated with this technology as i am, you want to get your hands dirty, how can you get started today? Maybe you want to code your own bot like this, but you don't really know how to code.
Yet or maybe you just want to learn your you know extra skills, maybe you know about how the blockchain part of it works. You know my youtube home page. You can find my free courses there. They'll like you to me courses, but they're totally free.
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