Chainlink Labs fights with MEV and developed a solution for Ethereum's high network fees.
When popularity is growing of smart contracts, new gaps appear that can exploit for unaware users. The best example is the Miner-Extractable Value (MEV). It is a kind of market dynamics where Ethereum miners are able to reorder or exclude transactions in the blockchain. Miners can determine the order in which transactions are processed and use this to their advantage. Chainlink Labs researchers have published an article describing how reorganization of transactions occurs on a massive scale and how overtaking decentralized exchanges has a significant impact on the user experience. While blockchains ensure that all transactions are correct and new blocks of transactions are constantly generated, there is really no guarantee that transactions will be saved exactly the same way they were sent to the blockchain. Miners do not order transactions according to the time of their submission, but the amount of fees paid. Bots manipulate the order of transactions within a block, change the transaction fee paid to miners. MEV takes place at the expense of ordinary users, often unnoticed. This results in increased network transaction fees and additional slippage in transaction processing. Arbitration bots benefit by buying assets on an exchange with a lower price and selling them on an exchange that offers a higher price. If a large transaction is noticed, the bot copies the user's transactions and pays a higher fee for his transaction to be approved first. This shifts the market price of the asset and the user's transaction is associated with greater price slippage and less tokens. Swap arbitration and overtaking are just two examples of how MEV is generated and can have a negative impact on users.
The problem was solved by Chainlink Fair Sequencing Services (FSS). They created a decentralized oracle network to fairly order transactions sent to the blockchain network. By separating the ability to extract malicious values such as overtaking. Chainlink FSS aims to support all transactions including smart contracts in an equal way for everyone, where the transactions are ordered sequentially according to the time of placing the transaction. An additional advantage is the possibility of encrypting transactions that are decrypted only after the user receives the asset. Not only does the FSS prevent fraudulent outsourcing, but it can also lower network gas prices (transaction fees) by limiting gas price bidding wars. In addition, the FSS solution has been specially designed without having to make any changes to the base layer blockchain on which the smart contracts are running. Chainlink FSS enables smart contract developers to be confident that their applications and users are treated fairly on the Ethereum network.
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