Da Hongfei on Neo’s MEV-Resistant Solutions

Within the ever-evolving panorama of blockchain expertise, combating the exploitation of Maximal Extractable Worth (MEV) has emerged as a essential concern. Da Hongfei, the Founding father of Neo, stands on the forefront of addressing this urgent subject. With over a decade of expertise since founding Neo in 2014, Da Hongfei brings distinctive insights into how blockchains can stop malicious actors from profiting off MEV, whereas driving safety for customers.

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Latest studies have make clear the alarming magnitude of MEV, with malicious actors opportunistically siphoning over $5.5 million in revenue from Ethereum alone prior to now 30 days. In opposition to this backdrop, Da Hongfei argues that it is time for the business to fortify its defenses towards MEV. He contends {that a} mixture of modern mechanisms, together with enveloping transactions and the delegated Byzantine Fault Tolerance (dBFT), presents a promising answer.

Da Hongfei’s latest article outlines the efficacy of those applied sciences in tandem, providing priceless insights into how they will improve MEV resistance whereas making certain person safety. Because the business strives in direction of a Good Financial system, Da Hongfei’s experience illuminates the trail in direction of better equity, safety, and resilience within the blockchain ecosystem.

Learn the complete interview for a deeper dive into Da Hongfei’s views and options on addressing MEV.

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Are you able to clarify the idea of Maximal Extractable Worth (MEV) and why it is change into a big concern within the blockchain business, notably inside the context of Neo?

MEV, brief for Miner Extractable Worth or Maximal Extractable Worth, will be carried out in varied types. The vast majority of MEV assaults are initiated by miners or validators who manipulate transaction orders to realize further worth for themselves, which is named “poisonous MEV”. Examples embody front-running, sandwich assaults, block withholding, and time bandit assaults.

MEV embodies the wrestle between centralization and decentralization inherent within the blockchain business. Miners and validators have the facility to rearrange transaction orders to their benefit, searching for further income past customary rewards and fuel charges.

It is cheap to estimate that billions of {dollars} are being misplaced to poisonous MEV yearly, and up to date figures counsel that greater than $1 billion has been extracted from Ethereum alone, showcasing the dimensions of the problem.

What motivated your curiosity in addressing MEV inside Neo, and why do you imagine it is essential for the ecosystem?

MEV assaults threaten the decentralized and clear ethos of blockchain, creating important equity and safety points within the DeFi house. This isn’t solely problematic for these interacting with the expertise, but additionally impacts the overarching fame related to DeFi. Due to this fact, in an effort to bolster continued funding, DeFi should deal with MEV.

Neo’s imaginative and prescient is to ascertain an open community for the Good Financial system, prioritizing equity and safety for all contributors. To realize this, Neo has launched our EVM-compatible sidechain, Neo X, able to eliminating poisonous MEV within the DeFi and broader blockchain sector, fostering belief inside the business.

You talked about combining enveloped transactions with the delegated Byzantine Fault Tolerance (dBFT) consensus mechanism as a possible answer to MEV. Might you elaborate on how these mechanisms work collectively to sort out MEV?

In combating MEV assaults, Neo X introduces two modern options, concentrating on consensus mechanism exploitation and transaction manipulation.

Firstly, the dBFT consensus mechanism, pioneered by Neo, eliminates poisonous MEV from the protocol stage, stopping miners or validators from compromising the block technology course of. It ensures that no consensus nodes can withhold the block-producing course of or, as soon as a block is generated, rearrange transactions.

Secondly, Neo X makes use of a mix of two basic cryptography instruments, Distributed Key Technology (DKG) and threshold decryption, to encrypt and decrypt transaction data. This ensures that transaction processors can’t see the data contained inside transactions, that means they have to course of all transactions neutrally.

This mixed technique is named “enveloped transactions”. Just like the transition from HTTP to HTTPS, enveloped transactions add safety and safety for the person.

How do enveloped transactions guarantee person privateness and shield towards potential exploitation by malicious actors within the context of MEV?

To realize MEV resistance, Neo X makes use of enveloped transactions to make sure all data is enveloped till included in a block and ordered, whereby consensus nodes will then decrypt the transactions.

To do that, Neo X makes use of DKG, the place every consensus node owns a partial non-public key, and all of the consensus nodes personal a single frequent public key. This permits customers to encrypt their transactions with the frequent public key, stopping others from viewing the transaction content material earlier than the transaction is ordered in a brand new block.

Then, every consensus node runs threshold decryption with its personal partial non-public key, which can’t instantly decrypt the uncooked transaction. To recuperate the entire uncooked transaction, there have to be sufficient consensus nodes (a minimum of the brink; bigger than two thirds in apply) that every present their very own partially decrypted end result.

DKG and threshold decryption function a sturdy privacy-preserving mechanism in blockchain networks, exemplified in how we’re utilizing it with Neo X. The expertise ensures that despite the fact that particular person consensus nodes maintain solely partial details about a transaction, the whole transaction knowledge will be reconstructed securely when a enough variety of taking part nodes cooperate.

This thereby maintains the confidentiality and integrity of the blockchain ecosystem, stopping malicious actors from participating in poisonous MEV.

Might you present insights into how the dBFT consensus mechanism, as carried out, contributes to stopping poisonous MEV and sustaining transaction integrity inside Neo?

Because the inventor and pioneer of the dBFT consensus mechanism, Neo X (and Neo’s legacy chain) inherently prevents MEV assaults.

The dBFT consensus mechanism achieves this in an modern method: Transactions in Neo have absolute finality as quickly as they’re confirmed in a single block, making certain there’s no room for time bandit assaults, whereas each consensus node’s conduct is underneath the group’s evaluate. If some nodes withhold a block too lengthy, the opposite nodes will begin a brand new consensus view and proceed producing blocks.

If some nodes proceed to withhold blocks, the group can see this conduct and can punish it, thereby stopping poisonous MEV gamers from profiting. If a node is rational and performs its job accurately, the group will see this, making certain transparency and safety.

It’s price noting that, mixed with enveloped transactions, the dBFT consensus mechanism permits for the best stage of safety and equity in blockchain transaction validation.
“Neo X introduces a singular, modern MEV-resistant answer with out radically overhauling the protocol layer that improves blockchain safety and efficiency, which is paramount to the blockchain business.”

Da Hongfei, Founding father of Neo

What do you understand as the primary challenges hindering the widespread adoption of MEV-resistant options inside Neo or comparable platforms?

MEV has existed for a very long time. The totally different approaches taken to sort out MEV end result from various views and every public chain’s totally different inherent nature. Whereas there are numerous options to MEV, and we’re positive that business is continually exploring new methods to sort out MEV, Ethereum and Neo for instance take very totally different approaches:

Ethereum’s answer is to make use of Flashbots to mitigate the damaging externalities posed by MEV. In different phrases, this implies democratically distributing the revenue generated from MEV amongst gamers within the blockchain ecosystem, validators, MEV searchers, and customers. The distribution technique retains evolving to realize the fairest final result attainable.
Neo’s strategy is to make use of the dBFT consensus mechanism alongside enveloped transactions to eradicate MEV, making certain absolute equity.

We imagine every strategy stems from the actual chain’s personal nature. Neo, uniquely geared up with the dBFT consensus mechanism, naturally circumvents this subject. Upholding the spirit of innovation and decentralization, we hope different blockchains and communities will comply with swimsuit. There’s loads of house for studying from one another and collaboration.

As latest figures level to poisonous MEV being liable for greater than $1 billion misplaced on Ethereum alone, the primary problem now could be making certain the business introduces the adjustments wanted to fight the issue.

How do you anticipate the panorama of blockchain expertise evolving regarding MEV prevention and enhancing total safety, notably inside the Neo ecosystem?

We imagine that because the business matures, equity and safety ought to at all times be prioritized, with the pursuits of strange customers protected. Neo, via our new Neo X and our legacy chain, opens the gate to EVM-based builders and provides MEV-resistant safety, which is of the utmost significance within the blockchain business. We imagine this can be one of the vital essential options that can develop our vibrant ecosystem.

As we drive progress in direction of the Good Financial system, the business would require the utmost in person safety and safety which, via our Neo X and legacy chains, is already evident. We hope, and can see in time, that extra blockchains understand the potential of mixing enveloped transactions with the dBFT consensus mechanism to make this a actuality.