YCabal: SushiSwap MEV Strategy
This is a formal proposal to the community, with the original discussion starting here: forum.sushiswapclassic.org/t/ycabal-monopolizing-transaction-flow-for-arbitrage-batching-with-miner-support/1910
Full Proposal Details, Rulebook, Governance and API Documentation can be found at the Backbone Knowledge Base backbone-kb.netlify.app
Introduce a permissioned RPC network layer connected to MEV-enabled mining pools so that we can aggregate transactions en-route to be mined, analyze them, create the necessary arbitrage transactions from those aggregated transactions (in real time) and batch send them to the mining pools. Arbitrage profits are then refunded back to the originating user account in the form of either:
- Other Asset
Arbitrage profits are split between:
- Mining pools (25%)
- SushiSwap community (50%)
- Manifold Finance (25%)
Estimates can be drilled down once market scope is established. Rough estimates based on trailing 30 day volume of the top 10 markets ranges from a low of $40,000 USD to a high of $380,000 weekly in potential arbitrage profits (gross). Note that this is an estimation and should not be taken as financial advice or any sort of guarantee of profits.
BackBone Cabal is a ‘strategy’ that utilizes MEV, or Miner Extracted Value. By leveraging the transactional flow of the sushiswap community we can provide near feeless transactions for the sushiswap community, in a 100% sustainable, non-subsidizing way. The potential for ‘surplus’ profits also exists, which means the community will have to decide how best to allocate such returns (e.g. funding developer grants, etc).
As SushiSwap grows, so does the potential for multichain arbitrage opportunities. Additional expanded avenues also arise as new products come into production (e.g. protecting liquidations from being front run, etc).
The Motivation behind this can be seen between these two images below. Right now, all trades are public. This means that arbitrage bots can front run and back run transactions much more easily as the entire transactional state can be seen. By deploying a two step process of 1) Aggregation and 2) Bundling our own Arbitrage transactions, we are able to return these arbitrage profits to the people who created those opportunities in the first place: you.
Transactions as they are now
Transactions as they would be
Implementation details are important, but what is most important is UX (user experience). Metamask is finally enabling a 1-click Network RPC configuration mechanism. This means you will just have to click a button as opposed to manually copy and pasting information into Metamask.
In fact, we have re-examined the entire ecosystem for better ways of communicating gas costs to users and have came with a few takeaways and services for the Sushiswap community:
ercgas.org - EthGasStation as it should be. Gwei prices are given in terms of percentile distribution.
SushiSwap Chrome Extension: This chrome extension (and firefox) provides gwei pricing. We plan on implementing a websocket and Web3 Provider through this extension down the line to help provide real time updates for the exchange front end and to help facilitate better connectivity for more sophisticated traders (Metamask does not support Websockets).
SushiSwap MEV API: An OpenAPI3 contract specification lives here: manifoldfinance.github.io/open-sushi/. Take note that we plan on providing useful endpoints like
/api/v1/solvable_ordersas an example.
Backbone Knowledge Base - This contains documentation relating to the technical and authoritative implementation details for Backbone Cabal. This is where the documentation for the strategy lives. Details like the rulebook can be found here.
Formally Verified Specification
Questions for the community
Which markets should be eligible? Almost ‘gas free’ transactions are a huge incentive to bring liquidity, so by identifying specific markets the possibility for larger effects is possible vs. every market being eligible
Surplus profits: How should thi be accounted?
Rulebook: while still a draft document, we tried to anticipate any potential issues (i.e. misbehavior) on the part of malicious actors. We also realize that managing such a platform brings the possibility of DDoS and other Outages. In the event of a network outage the rulebook defines the terms for reimbursement and other obligations. Note: this scenario wouldn’t affect more than 5-8 blocks worth of trades at most, as our fail safe would just broadcast transactions on the public mempool.
Monopolize SushiSwap transaction flow and leverage that into arbitrage trades that no one else can see. Profits are redistributed back to users who submitted trades in the first place in the form of eliminating their transaction cost (up to 90%). This enables scaling SushiSwap without having to change any of the contracts, and provides SushiSwap users with an advantage against other exchanges / pools by having its transactional flow sent privately (as opposed to public).
SushiSwap pays $0 upfront or ongoing.
SushiSwap users get to claw back slippage and gas costs, seamlessly, with the click of a button (opt-in).
A beta test network can be live in production by mid April, with full scale production in early May.
- yes lets be like the bulls (yes to proposal)
- no for the proposal
Links / Contact
discord: meridian 'Sam Bacha' email: firstname.lastname@example.org telegram: @sambacha github.com/backbonecabal github.com/manifoldfinance t.me/manifoldfinance https://twitter.com/foldfinance