RFP 16 - Cross-Domain MEV Auctions

Researcher: Unassigned


This Request for Proposal (RFP) seeks to commission the development of sufficient infrastructure to support cross-domain Maximal Extractable Value (MEV) auctions, facilitating seamless communication protocols between validators of different blockchain networks. The goal is to enable validators from distinct chains, focusing on Cosmos and Ethereum as primary examples, to collaboratively construct specific blocks. This collaboration will leverage a fork of the Block SDK from Skip and utilize the MEV-Boost Relay from Flashbots for enhanced communication and operational efficiency.

Background & Problem Statement


Core background concepts/definitions are as follows:

Cross-Domain MEV

Maximal Extractable Value (MEV) is a concept that has emerged within blockchain ecosystems, representing the maximum value that can be extracted from ordering, censoring and/or inserting transactions into a block. Initially identified in the context of Ethereum, MEV has broader implications across multiple domains. The advent of cross-domain MEV extends this concept across different blockchains, tapping into the potential for arbitrage, front-running, and other extractable value opportunities not just within a single blockchain, but across multiple blockchains simultaneously.

Cross-domain MEV arises in scenarios where transactions across different blockchains (domains) can be sequenced in a way that maximizes value extraction. This could involve, for example, exploiting price discrepancies for the same asset across decentralized exchanges on different domains, or coordinating complex transaction sequences that span multiple networks to achieve a particular financial strategy. The cross-domain aspect significantly expands the MEV landscape by introducing a multi-layered complexity and a broader set of opportunities for value extraction, necessitating advanced strategies and infrastructure for its realization.

Complementarity and Auctions

Items are considered complementary when the value derived from their combined usage exceeds the sum of their individual values when used separately. This principle is foundational in auction theory, where the joint valuation of items can significantly impact bidding strategies and auction outcomes.

In the context of cross-domain MEV, blocks from two different blockchain domains embody this concept of complementarity. The simultaneous construction or influence over these blocks creates unique opportunities for value extraction that would not be possible when operating within a single domain. This is because actions in one domain can unlock or enhance opportunities in another, leading to a synergistic effect that amplifies the overall extractable value.

For example, consider an arbitrage opportunity involving an asset that is undervalued on Blockchain A and overvalued on Blockchain B. By having the right to construct blocks simultaneously on both A and B, an entity can execute a buy order on A and a sell order on B in perfect coordination. This not only captures the price discrepancy between the two markets but also maximizes profit and reduces the exposure to price movement risks. In this scenario, the blocks on each domain complement each other by facilitating a cross-domain strategy that is more valuable than the sum of isolated actions on individual blockchains. However, currently searchers can not express their preferences atomically between different domains, leading to reverted transactions, money lost, and suboptimal blockspace allocation.

Problem Statement

The question that this research aims to address is as follows:

  • How can we develop a communication protocol that enables concurrent block proposals across two distinct blockchain networks to achieve consensus on two specific blocks through a trusted third party?

Following the conceptualization of the architecture and the creation of a proof of concept for testnets, the goal is to establish a framework that facilitates the expression of cross-domain bundles. These bundles and orders would then be ordered using a greedy approximation algorithm.

Plan & Deliverables

The goal of this RFP is to conceptualize, develop, and validate a pioneering solution for cross-domain MEV auctions that addresses the intricacies of cross-chain communication and block execution. The expected outputs and deliverables from the successful bidder are as follows:

Proof of Concept Architecture

  • Develop a detailed architecture for a system that enables the outsourcing of blocks from different domains as bundled blocks. This architecture should outline the mechanisms for bundling transactions across chains, ensuring secure and efficient communication between disparate blockchain networks.

  • The architecture should include a comprehensive description of the communication protocol, data structures, and algorithms required to support the bundling and execution of blocks across different domains.

Functional Code on Local Testnets

  • Deliver functional code that implements the proof of concept architecture. The code should be capable of being deployed and tested on local testnets to demonstrate the feasibility and efficiency of the proposed solution.

  • The codebase should include all necessary components for setting up and executing cross-domain bundles, including smart contracts, off-chain services, and any other tools required for testing the system.

  • Create comprehensive documentation accompanying the codebase, detailing the setup, deployment, and testing processes. This documentation should enable third parties to replicate the testnet deployment and validate the functionality of the system.

Testing and Validation Report

  • Conduct extensive testing of the developed system on local testnets to evaluate its performance, security, and reliability. Testing should cover various scenarios, including different transaction volumes, network conditions, and cross-chain communication challenges.

  • Provide a detailed report of the testing methodology, test scenarios, outcomes, and any issues encountered during the testing phase. The report should also include recommendations for addressing any identified challenges and enhancing the system’s performance.


How to Participate

If you’re a researcher who believes that you would be a good fit to contribute to any of the Composable RFPs, please reach out to Composable’s Lead Research Associate, Sydney Sweck, at sydney@composable.finance. In the email, be sure to include:

  • The RFP number(s) you’d like to contribute to

  • Your relevant background experience

  • How you think you could contribute to the research