Interesting post! Just want to quickly disambiguate two concepts:
- MEV Auctions #1 – Auction off the right to sequence transactions.
- I’ll call this "Sequencer Auction"s for this response. This is the topic of the post you linked to.
- MEV Auctions #2 – MEV-Geth where traders can express more complex transaction inclusion preferences than a simple gas price auction (GPA).
- I’ll call this MEV-Geth (just for this post). This is an awesome project by flashbots and is being used by L1 PoW miners.
Sequencer Auctions are simply the auction mechanism for selecting who is the next sequencer. In fact there is a bit of a ‘sequencer auction’ in Ethereum L1 – it’s the PoW which determines the next block proposer. The insight with sequencer auctions is that instead of selecting block proposers by burning energy, sequencers can instead pay for the privilege of selecting contents of the next block.
Sequencer Auctions can and should be coupled with things like submarine sends/time-lock encryption for reducing total possible extractable MEV. However, for any remaining MEV (like slow market arbitrage), we can at least give the profits back to users instead of distributing them to random sequencers (aka miners).
As for MEV-Geth, MEV-Geth is software that any individual sequencer (or block producer) would run to extract a block’s MEV in a standard way that allows traders to be involved & express their preferences.
So one way to think about this is that there are 2 auctions that occur which are fundamental to the blockchain designs we’ve seen so far:
- the auction for being the next block producer (sequencer auction), and
- the auction for what gets included in the next block (GPA/MEV-Geth).
The term MEV Auctions have unfortunately been used to talk about both of these distinct functions. I guess that’s the downside of using super general terms like MEV Auction! Whoops!