I can’t think of an Ethereum use case that would not be victimized by a censorship market (beyond basic p2p currency/NFT transfers).
Frontrunning is bad, but smart contracts can be written to mitigate frontrunning within a block. They cannot be written to mitigate n-block censorship.
If Defi moved to batch auctions it would avoid all intra-block MEV because it renders time order irrelevant. Censorship undoes app level mitigations like this, because you can’t batch up transactions that never made it into the chain in time.
I’m still pondering this, but it may be that the logical conclusion of a censorship market is that much of the business conducted on Ethereum will give all of its profits to the dominant extractor.
Imagine a retail smart contract matching buyers to sellers:
- A user sends a transaction ordering ice-cream and two businesses (A and B) send transactions to fulfill it.
- They both sourced the ice-cream for $2 aiming to sell it for $4.
- A censors B for $0.50.
- B protects themselves for $1, and then censors A for $0.50.
- A protects themselves for $1, and then censors B for $1.99.
- They can’t go any higher.
- B loses the transaction.
- A wins the business, but pays all of their profits to the dominant extractor.
If you see this as prisoner’s dilemma, the dominant extractor always wins (I guess arguably it is iterative).
Not only that, but one way to win is to raise your price to the customer. If B had offered the ice-cream for $5 instead, they would have been able to afford to censor A and the customer would have paid $1 more.
I’m not sure that business is possible in an environment as exploitative as this, especially when less-extortionate centralized alternatives exist.
And this is the problem, I think that PBS/MEVA stop Ethereum being useful.
Instinctively I prefer your consensus mitigation idea despite your reservations about it, but your alternative strategy looks interesting- I need to think it through.
EDIT: updated to show that it is the dominant extractor / censorship market operator that profits, not the miners