A summary of cross-domain protocols, not only as a guide to under-
standing cross-domain MEV, but also as a resource for understanding the cross-
domain world in general. Some of the most promising protocols for enabling a
cross-domain world, such as shared sequencers and generalized order-flow auc-
tions, are also the protocols with the most open questions. This highlights that
the cross-domain world of today is still under construction, and will likely be
very different to that of the future. This future will be shaped by the answers
to the open questions that we have posed among others. As value is created in
the cross-domain world, so to will value extraction opportunities. That being
said, many of the ideal protocol functionalities of Section 3 effectively eliminate MEV, or allow for its redistribution. Censorship and centralization are common
barriers for many of the protocols that we discuss. These stand as areas that
warrant particular focus from the research community.
Can Cross-Chain MEV be Atomic?
As web3 becomes increasingly multi-chain, these cross-chain MEV opportunities will become more popular and more interesting. However, atomicity is essential to MEV. For MEV opportunities to occur the cycle must be atomic: something happened, or it didn’t. The multi-chain world is not very atomic, which creates all sorts of opportunities for risks that can be difficult to understand, measure, and mitigate.
While bridging, as described above, is the classic way to do cross-chain transactions, transactions take too long to settle and thus become unpredictable. During settlement time, others can capture MEV opportunities before the bridged transactions are completed. Parallel-chain MEV offers a solution.
Analysis or perspective on the research
As Composable works to construct a cross-domain intent settlement platform, a novel aspect of MEV that I have begun to consider is its relationship with the pricing of intent settlement. I believe that these two variables may be related. In this post, I explore the importance of intents, including how Composable’s cross-chain intent settlement framework can minimize transaction/gas costs in tandem with maximizing cross-domain MEV extraction.
Can We Enable a Free/Reduced-Cost Exchange?
Exchange controls are government-imposed limitations on the purchase and/or sale of currencies. These controls allow countries to better stabilize their economies by limiting in-flows and out-flows of currency, which can create exchange rate volatility. Not every nation may employ the measures, at least legitimately; the 14th article of the International Monetary Fund’s Articles of Agreement allows only countries with so-called transitional economies to employ exchange controls.
The Future of MEV
We are now looking at two possible paths: either we find a way to shift MEV structure a third time, and do so in a way that sustainably eliminates the centralizing forces in block building. In this case, the promise of crypto may be realized. Or we concede block building to a small number of centralized entities, and the decentralization of crypto will be lost.
We must align on unifying infrastructure that allows honest MEV actors to profit more than dishonest ones. We must align to preserve shared ownership and competition with a global ecosystem of permissionless actors.
There is no shortage of companies or actors who are still more than happy to centralize cryptocurrency for their own gain. There is no shortage of those willing to embrace centralization as long as it is centralization to their own wallets. There is no shortage of those who would prefer that cryptocurrency looks more like the traditional financial systems they currently dominate.