Rapid Insights: Censorship on Ethereum

The architecture of FlashBots' new flagship product, "mev-boost," which aims to optimize MEV extraction under PoS consensus, has caused some concerns within the Ethereum community around the censoring of transactions.

To gain a better understanding of the censorship issue, it is useful to examine MEV extraction techniques used under PoW consensus. As an example (albeit a simplified one), we consider a sandwich attack; imagine Alice swapped $2mm USDC for ETH on Uniswap. This kind of transaction would push the price of ETH up relative to USDC (increasing the supply of USDC in the pool, decreasing the supply of ETH). Searchers monitoring the publicly accessible mempool would see this transaction and attempt to submit a transaction (denoted as TX_-1 where the subscript reflects the order of execution) buying ETH using USDC from Uniswap immediately before Alice's transaction (denoted as TX₀) and another transaction (denoted as  TX₁) selling ETH for USDC immediately after Alice's transaction at a higher price.