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We would like to thank Michael Moser and Umberto Natale from ChorusOne, Pavel Yashin from P2P Research, Dougie DeLuca and James Parillo from Figment Capital, Murat Akdeniz from Primev, Arnav Pagidyala from HashKey, Pascal Stichler from Ephema, Daniel Wang from Taiko, Matthew Felice Pace from Simply Staking, Shikhai Wei from LongHash Ventures, Ankit Chiplunkar from Frontier Research for their valuable feedback.
Outline:
Section 1:
Section 2: Preconfirmations on L1
Section 3: Preconfirmations on L2
Section 4: Conclusion
Blockchains have ushered in a new era in global human coordination by enabling permissionless access and decentralization. Thoughtfully crafted incentive mechanisms and cryptographic techniques facilitate the flow of value among all participants within an open ecosystem. However, all participants are not equal and sophisticated actors continue to extract value from unsophisticated end users. Significant improvements have been made to enhance the user experience and democratize the MEV landscape but Ethereum continues to be a dark forest, offering sub-optimal user experience due to the extractive techniques of different monsters.
We believe that preconfirmations are the next natural step in the evolution of blockchain design space intended to level the playing field for all participants and improve the user experience. We contend that preconfirmations will be essential in bridging the gap between execution experience between web2 applications and dapps that exists today. In this article, we begin by defining preconfirmations. Next we describe the various approaches being proposed and designed, their respective tradeoffs, and the impact on the future of execution in web3.
In everyday life, people are so familiar with preconfirmations that they hardly notice it. For example, when making an online payment or placing a BUY order on a platform like Robinhood, users expect their request to be fulfilled once they see a confirmation on their screen. The entity processing the order might face numerous challenges to complete the request, but users remain unaware of these complexities.
In blockchain transactions, preconfirmation serves as a reliable and timely promise from a provider (someone who executes such as a validator or block builder) to a bidder (the entity needing transaction execution). This promise, offered in exchange for an economic incentive, ensures better transaction execution. This promise could mean different things depending on whether it is a promise of transaction inclusion, execution or success. Depending on who is responsible for block building, preconfirmations can be provided to end users or intermediaries like searchers, solvers, bots, AA bundlers, or even rollup sequencers. By quantifying and reducing the execution risk associated with transaction ordering and blockspace contention, preconfirmations enhance the user experience and allow users to accrue more value by providing timely execution.
Various methods have been proposed to achieve preconfirmations. For the purpose of simplicity, we analyze Ethereum L1 and its growing ecosystem of L2s but many of these concepts can be applied to other PoS alt L1s as well. We categorize preconfirmations based on two characteristics:
Based on these two axes, we can divide the whole space as:
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More than 90% of the blocks on L1 currently are finalized through mev-boost. Validators auction off the right to build a block to the builder who bids the highest in an auction. Users, trading bots and searchers (special users who run algorithms to construct profitable transactions) submit their transactions via RPC nodes to mempool or directly to builders. Builders construct the most profitable block possible by aggregating transactions from the public mempool and private orderflow and then bid in an open auction to win the right to build the block. The auction is facilitated by relays who ensure that the highest bidding block wins and the validator cannot steal the MEV from the builder and keep all the MEV rewards for themselves.
MEV-Boost has enabled the separation of the proposer and builder role but a number of challenges still persist:
In order to overcome these challenges, we need a coordination mechanism amongst all the intermediaries (users, bots, searchers, builders, relays and validators) to enable trustless and reliable communication in a timely manner. Preconfirmations could solve a number of above mentioned challenges by serving as a coordination mechanism, and several approaches have been proposed to implement it. For transactions on L1, we look at Inclusion Lists, Execution Tickets and mev-commit by Primev.
ILs allow proposing validators to force include certain transactions in the current or subsequent block. The idea was proposed by Mike, Vitalik, Francesco, Terence, Potuz, Manav in late 2023. The motivation behind IL is to address the limitations faced by validators in absence of a forced inclusion mechanism. Without IL, validators must either entirely outsource block building or forgo MEV by building the block locally. IL enables proposing validators to outsource block building while still ensuring the inclusion of specific transactions.
The proposer for slot N broadcasts a signed block and an inclusion list for slot N+1. The transactions in the IL will be included in slot N or slot N+1, otherwise the N+1 block will be invalid. Slot N validators only consider the block for validation if there is at least one inclusion list for that slot. For slot N+1, the proposer incorporates a signed summary from slot N proposer and the payload is considered valid if it satisfies the inclusion list summary, and the consensus conditions are met with a proposer signature of the previous block.
The proposal is currently in the draft stage. IL also forms the basis of execution tickets and the original based preconfirmation architecture proposed by Justin Drake which we discuss later in this article.
ET was originally introduced as Attester-Proposer Separation (APS) by Justin Drake, and later published in an ethresearch article by Mike Neuder. Currently, validators are responsible for two primary tasks:
Validators are selected randomly for both tasks through a single lottery based on the amount of staked ETH. However, the task of building execution payloads can exert centralizing pressure on validators, as they may vertically integrate with builders and leverage low-latency connections. ET is being proposed as a solution to bifurcate these two responsibilities, protecting validators from centralizing forces and enabling more solo validators to participate as beacon block validators, thereby boosting decentralization.
The existing PoS lottery will be used to select validators randomly to propose beacon blocks. However, a separate primary lottery market will be created to allow entities to purchase ETs. The ticket owner will have the permission to propose the execution block for the slot (which they can do themselves or outsource via mev-boost). An execution block proposer will be selected at random from all the ET holders.
IL and ET improve censorship resistance and separate the roles of proposing beacon blocks and building execution payloads. However, they fall short of enabling the entire MEV supply chain to coordinate effectively. They also do not sufficiently reduce the likelihood of off-chain deals and vertical integration. Mev-commit could address some of these issues.
Mev-commit is a P2P network designed to enable all MEV intermediaries to coordinate efficiently and trustlessly. It features a fast chain, a fork of geth, where commitments about the execution of Ethereum transactions can be recorded along with the logic to reward/slash providers. It allows bidders (such as Searchers, Solvers, Telegram Bots, AA Bundlers, Wallets, Transaction aggregators and end users) to specify their preference for transaction execution and get a commitment from execution providers (such as block builders, validators). These preferences could be something like:
The process overall can be summarized in the following steps:
Mev-commit opens up a whole new design space for what is possible on blockchains:
The Primev team has been building mev-commit for two years now and is currently live on testnet with many validators and builders testing it for mainnet readiness.
Most rollups handle sequencing and execution, while relying on Ethereum L1 for data availability and settlement. Currently, rollups use centralized sequencers to accept and sequence transactions. A validator/prover then generates the final state based on these sequenced transactions and posts it on the L1 bridge contract.
Centralized sequencers can provide users with soft commitments about transaction inclusion before L1 verification. Users cannot enforce these soft commitments (via programmatic slashing or arbitration) but they can trust the sequencer’s commitments since they are responsible for selecting and sequencing. This soft commitment can be termed as preconfirmation. However, if the validator/prover fails to post the final state on L1, as seen with Degena and Proof of Play’s Apex, this trust is compromised. Centralized sequencers offer preconfirmations but also pose risks of censorship, single points of failure and MEV extraction. Decentralizing sequencers is challenging, especially in maintaining preconfirmations for users.
In order to leverage the existing L1 MEV supply chain to build and propose L2 blocks, Justin Drake formally proposed based rollups in March 2023. The idea was first introduced as “Total Anarchy” by Vitalik in the article “An Incomplete Guide to Rollups” in 2021 where total anarchy meant that anyone could submit a batch at any time. Justin Drake followed up his proposal with the concept of based preconfirmations in November 2023 for preconfirmations in the absence of centralized sequencers.
As defined by Justin Drake, “A rollup is said to be based, or L1-sequenced, when its sequencing is driven by the base L1. More concretely, a based rollup is one where the next L1 proposer may, in collaboration with L1 searchers and builders, permissionlessly include the next rollup block as part of the next L1 block.”
Basically, L1 builder or L1 searcher can play the role of L2 block builder by picking the transactions from L2 mempool, building the L2 block and including it in the L1 bundle. Since most of the MEV flows to the L1 validators, L1 proposers are incentivized to include rollup blocks on the L1.
Taiko is the first based rollups to launch mainnet and a few others like Aztec are considering becoming a based rollup. You may read details about Taiko’s based rollup design here. We will continue to focus more on based preconfirmation.
Based preconfirmations allow rollups to leverage L1 sequencing without sacrificing the benefits of preconfirmation offered by centralized sequencers. To enable effective based preconfirmations, following requirements must be met:
Some of the notable proposals are:
Preconfirmation is an inevitable aspect within the broader field of blockspace monetization and technological improvements in transaction execution. While introducing OneBalance, Stephane Gosselin also talked about the importance of preconfirmation in helping solvers manage their settlement risk. Conversations with builders, searchers, solvers, and other ecosystem participants indicate that preconfirmations are likely to gain momentum in the near future.
Before widespread adoption, it is essential to conduct thorough research, auditing, and testing. Ensuring efficient price discovery of commitments and preventing centralization is vital. As Lin Oshitani highlighted, naive implementations of based preconfirmations can lead to negative externalities. We are excited to see many validators already participating in the mev-commit testnet, which helps them better understand the economic impacts, benefits, and risks associated with preconfirmations.
Extensive research is already underway, spearheaded by the Ethereum Foundation and the broader community. Numerous teams and researchers have published their findings and proposals on this topic. Drew Van der Werff proposed Commitment Boost, an idea to standardize the way proposers register, send and receive commitments. mteam from Spire Labs introduced Preconfirmation registry, a system for proposers (large operators as well as solo-stakers) to post collateral in ETH. Chainbound recently announced Bolt, a protocol that allows Ethereum proposers to offer commitments about their block contents. Primev proposed a solution for blob preconfirmation using mev-commit and IL. As the number of L2s increase and the blob market becomes saturated, the solution will allow L2 sequencers to gain certainty about blob inclusion and mitigate latency issues of blocks with many blobs in the future.
We believe that out-of-protocol implementations will act as a catalyst for innovation and iteration, speeding up time to market similar to Flashbots' mev-boost. These implementations will help researchers refine designs and gather valuable feedback from all entities without overloading the L1.Vitalik recently mentioned in his blog, “Layer 1 could incorporate a "fast pre-confirmation" and "slow final confirmation" system. It could incorporate different shards with different levels of security. However, this would add a lot of complexity to the protocol. Furthermore, doing it all on layer 1 would risk overloading the consensus, because a lot of the higher-scale or faster-throughput approaches have higher centralization risks or require stronger forms of "governance", and if done at L1, the effects of those stronger demands would spill over to the rest of the protocol.” Each thing we enshrine in Ethereum, like SSF, ePBS etc, adds an extra round of attestations and could increase block times to 20-30 seconds. In such a scenario, preconfirmations become infinitely more valuable because it allows ethereum to innovate without degrading UX.
The improved user experience and new use cases enabled by preconfirmations will drive demand. On the supply side, additional revenue from bidders, enhanced censorship resistance, and a robust blockspace market will be key factors. Preconfirmations stand out as one of the most promising innovations to address the inherent limitations of the Ethereum transaction supply chain. We are extremely excited about this emerging space and are thrilled to see the support from the Ethereum Foundation and the broader community. We believe that preconfirmations will play a crucial role in elevating the Ethereum transaction execution experience to be on par with rollups and empowering users to survive the dark forest of MEV while fostering sustainable blockspace market.
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LongHash is a crypto-native venture capital firm since 2017. We invest in and build alongside visionary founders forging the next evolution of the open economy. Follow Raghav (x.com/@0xRaghav) for more research on MEV and preconfirmations.
Disclosure: LongHash Ventures has invested in Primev.
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Additional Readings: