Lido Node Operator MEV Boost min-bid guidance

Node Operators
16

We appreciate the valuable discussions so far. We believe we should consider min-bid’s impact not only on decentralization but also on base-fee volatility, and thus we should spend more time studying on understanding the influence of each parameter properly.

Here are the three key points:

  1. The relationship between min-bid and Lido’s censorship resistance is unclear. While having more vanilla blocks may result in avoiding building blocks with OFAC-compliant relays and thus can enhance censorship resistance, we need to investigate its correlation with practical metrics like Average Censorship Latency(as suggested by @vsh).

  2. Vanilla blocks may increase base-fee volatility, creating a potential trade-off between decentralization and the economic efficiency for the end users.
    This is described in the recent presentation by Matt Cutler of Blocknative.

In a nutshell, what is said here is as follows;

  • There is an increasing amount of private transactions, which affects the gas price market.
  • Self-built blocks don’t contain private transactions as they don’t have access to private mempools.
  • Self-built blocks usually have much less gas used, in comparison with MEV-boosted blocks, due to the fact that they don’t contain private transactions.
  • After self-built blocks, there usually are recovery blocks that include a higher amount of private transactions than normal MEV-boosted transactions. This is because there is high pressure from private mempools on recovery blocks, and this results in a higher amount of gas used.

This is how base-fee volatility is increased with vanilla blocks.
There should be a lot to be studied before making a concrete understanding, and what we’d love to say here is that we should be careful about increasing the number of vanilla blocks produced as it might worsen the situation for users.

  1. If we prefer to do something to enhance Lido’s censorship resistance in a short time frame, reducing the rate of OFAC-compliant relays might be an option. This could be done by adjusting the policy on relays that can be found at “A.1.II Relays” on this page.

As we understand, the ultimate goal of this discussion is to keep Lido censorship-resistant, while improving economic efficiency. This problem can be reframed into “lowering the rate of OFAC-compliant relays while keep improving economic efficiency.”
However, this is not desirable for two reasons,

  1. As far as we know, we do not have a strong urge to rush on improving Lido’s censorship resistance.
  2. Allow/blocklisting (OFAC-compliant relays, in this case) is not a cool solution in general, especially when we are talking about censorship resistance.

We would love to continue to discuss this matter and contribute to the better approach to make Lido be more censorship resistant!

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