Block Building and the MEV Supply Chain w/ Kubi Mensah (Titan Builder)

**Speaker A:** Foreign. **Speaker B:** Hello and welcome back to the Strange Water Podcast. **Speaker C:** Thank you for joining us for another conversation. In the beginning, Vitalik said let there. **Speaker B:** Be eth and there was Ethereum, and. **Speaker C:** We all saw that Ethereum was good. **Speaker B:** Or at least we all believed that one day Ethereum could be good. For the Ethereum that was born in 2015 had many problems, some quite obvious and others far more subtle and sinister. Perhaps the most important example of one of these day zero imperfections existed quietly outside of view until November 2020, when Stefan Gosselin dropped one of the most impactful ETH Research Forum posts. Flashbots Front Running the MEV Crisis along with so much research that came before and after, this post set off a crisis in the Ethereum community where we first confronted the existence of the Dark forest, and that ended up drastically transforming the Ethereum roadmap and the end game. **Speaker C:** Of the world computer. **Speaker B:** As an aside, you should search Ethereum is a dark forest paradigm for even earlier canonical research, but here's the Hyper Condensed version. Before flashbots, Ethereum transactions were preyed upon by highly sophisticated actors capable of manipulating financial markets and flows to extract value from users. Flashbots designed a system to introduce competition, channeling this extracted value away from the predators and towards the Ethereum network participants, which are the ETH stakers or validators. This solution has created a complex system made up of many different actors, including. **Speaker C:** Block builders, MEV searchers, block relays, network validators, and more. **Speaker B:** And yet this added complexity has enough benefit that it has been weaved into. **Speaker C:** The core Ethereum roadmap. **Speaker B:** Here in 2024, we sit in this incredibly unique moment of transition, the moment before the dark forest feels safe and warm, but with enough pieces in place so that we can understand how we get there. And today we have the perfect guess to help us not only understand what the landscape looks like today, but how it is changing and what it might look like in its end state. Kubi Mensah is a co founder of Gattaca, the company behind TitanBuilder. **Speaker C:** TitanBuilder is one of the core players. **Speaker B:** At one of the most critical points of the MEV supply chain, responsible for building close to one third of all Ethereum blocks. This conversation is a rare look into one of the more opaque layers of the crypto stack, including a deep dive into what the MEV supply chain looks like, a discussion of just how relevant the risks of the inclusion delay, and even concepts like validator proposer separation. Again, this conversation is a treat and. **Speaker C:** I hope you enjoy it as much. **Speaker B:** As I Did one more thing before we begin. Please do not take financial advice from this or any podcast. Ethereum will change the world one day, but you can easily lose all of your money between now and then. **Speaker A:** Okay. **Speaker B:** Ladies and gentlemen, Kubi Mensah. **Speaker C:** Kubi, thank you so much for joining us on the Strange Water podcast. **Speaker A:** Yeah, sure thing. Great to be here. **Speaker C:** Of course, man. So before we like kind of really get into it and I'm so excited to like walk through the MEV supply chain, I'm a huge believer that the most important part of every conversation are the people in it. So real briefly, could you just walk us through, like, who are you? How'd you find crypto? And then I guess ultimately what led you to the block building side? **Speaker A:** Yeah, sure. So, hey, I'm Kubi, co founder at Gattaca. So Gattaca is the company that is behind the Titan Block Builder and recently also the Titan Relay. My personal background is software engineering, cybersecurity. So software engineer at heart built a cyber security startup before getting into crypto. So that was my first venture out of uni. But then I guess as my previous company got acquired and I worked for the company that acquired us, I had a lot more time on my hands and I started dabbling. And just because of my cybersecurity background, I've always heard about crypto and specifically bitcoin back in the day from afar. And the concepts of encryption, hashing, public keys, private keys all kind of made sense to me. But really putting all these concepts together to create this ecosystem or this new machinery that allows us to exchange value was fascinating. Yeah. So I had more time on my hands and basically started just dabbling, which meant trading and buying some stuff and looking to different kinds of project. And that basically got me down the rabbit hole of crypto. Awesome. **Speaker C:** And my understanding just from like learning a little bit more about you, is that part of like what really got you into MEV and like the competitive games was that you were like building applications and scripts and whatever for like games of probability that weren't necessarily related to crypto. I would just love to hear a little bit about how that journey of basically like MEV in a non MEV world, like led you to realizing that these same skills and same ideas, like, are going to be critical enough that you can build like what, I hope what we both think is going to be one of the most important companies in like the future financial system. **Speaker A:** Yeah, so I basically as a kid, I've always been just doing like side projects and writing some Code and just exploring different things that I find interesting. And I found it fascinating that you could basically write some piece of software like at home in front of your computer and just generate income. And so one of my good friends from uni, who's actually also one of my co founders from the previous company and is part of the current company as well, so we've been working for like decades together, but we essentially embarked on like one of the side projects, which was, right, writing a bot for like, as you mentioned, probabilistic skill games on the Internet that involve probability. And so that involves just like conceptually architecting software in a certain way, like having sort of the signal generation process, the, you know, generating then the action based on the signal and then automating in uptime and all of those kind of things. So it's kind of the same concepts that most trading system follow. And when we then first got into crypto and did some manual buying here and there and exploring different kinds of assets, it was quite apparent very early on that there are lots of arbitrage opportunities. So you could literally do them manually. So why not automate this? And we sort of followed the same principles and that just ended up evolving more and more into sophisticated trading systems. So none of us actually had a financial sort of background or worked in like a tradfi before getting into this. But the system became more sophisticated. So we actually started building liquidity provisioning services for like crypto project, then understanding the microstructure better and the functioning of the order book. We then did market making as a service and then actually transitioned that to proprietary market making. So like proper HFD style market making on centralized exchanges. And this was during a time where the market wasn't super competitive and so none of the big truck five players were in crypto yet. So naturally, you know, naive engineers with some grit could become competitive. But we knew this was nothing long term. But whilst we're doing this, we also got exposed to some of what we called back in the day on chain trading, which is now I guess all lumped into mev. And that sort of led us down a path where we were like, okay, this is a tiny new world. This is a market structure that has never existed before. So focusing more in this ecosystem would make a lot more sense because we could actually be competitive in the long term. And that's what started all of this. **Speaker C:** Awesome. And I don't want to just beat your background too much to death, but I think like an important thing to, to highlight here because I Think it kind of becomes your story. And the story of MEV is. Correct me if I'm wrong, but my understanding of why you kind of left these probabilistic games and entered into crypto space is because you saturated the market and your, like, strategies and your success was so large that it was like, basically pricing you out of your own games. And so basically you need to go find a different game. Fortunately, he found a bigger game and so, like, all things work out. But I. I just. I love that story because it is a microcosm of everything. In mev, which is the first one, there is able to, like, extract a lot of value. But, like, you cannot just rest where you land. Like, you have to continue on the race, you have to continue moving forward because, like, there is a, like, unstoppable wall coming behind you, which, like, once it passes where you're at, like, there's no value in what you're doing anymore. **Speaker A:** Yeah, absolutely. So, like, with all trading style of strategies, like, there's just very high alpha decay usually. And so you just have to constantly push the boundaries, whether it's latency, whether it's based on signal detection or whatever it is. And so, yeah, you're very right. So as. As soon as either the market becomes saturated by yourself because you take up a large enough space in the market, or just new players enter the market. Yeah. **Speaker C:** Awesome. So let's keep that in mind as a theme as we, like, walk through the rest of this conversation. But so let's zoom forward to this kind of founding moment of Gattaca, which, first of all, the name Gattaca. I have to ask, like, when I hear Gattaca, I think Ethan Hawke and like, discrimination based on gene pools. But real quick, like, where did you. How did you pick that name? What's the meaning behind it for you? **Speaker A:** Yeah, you're absolutely right. So it is based on the movie. So both my co founder, Philip and I, we are big fans of the movie. And, you know, there's this specific scene in the movie where the two brothers play the game of chicken, right, when they paddle out to sea. And one is obviously genetically superior, so always wins the game. But then there's one time they actually went out to play chicken again, and he, the genetically not superior brother, actually won and then actually saved the other brother. And when they came back to shore and he saved his brother and he was like, how did you manage to do this because you physically shouldn't be capable. And his answer was, basically, because I saved nothing for the way back Right. And when we entered sort of this trading game and not being like from a financial background and all of that, we always felt that we were not like we were the underdog in the game. And so just sticking to that principle of not saving anything for the swim back is basically what kept us going. And yeah, that's why we call the Gattaca. **Speaker C:** Man, that is so cool. That is so badass. And I'm jealous, honestly. Okay, so let's, let's kind of like continue this narrative through the founding moment of Gattaca. So it sounds like you're basically like going through this moment where you've developed one of the early like porn prop trading firms in crypto and then realize like, we could probably continue down this route, like maybe go hire some like tradfi guys, some like real quants and really just do trading stuff. But you kind of made this pivot to say like the important thing that's going on here is not necessarily like the individual moves, but it's like the whole infrastructure and the whole system. So can you like really talk through that moment of like what was that aha moment for, for you? And, and I guess like the, the parallel story I want to tell during this is like what was going on with Ethereum during that time Was this like pre Flashbots era. Was this the era where Flashbots was just starting to, you know, communicate that there was this dark forest that we need to like build systems? Were we already in the relay era? Can you talk through a little bit about like what was the, the block building founding moment? **Speaker A:** Yeah, so just to take a bit of a step back, so when we sort of started shifting resources from centralized exchanges to like this on chain trading world MBV, we mostly focused on EVM compatible L1 chains. And the reason why was because we had built a lot of low latency infrastructure for the centralized exchange trading and that really wasn't an edge on Ethereum, for example, where you had already the FlashBots MEV auction. Right. And you obviously have the 12 second block times. And so we, we did a lot of atomic arbitrage, a bit of CX dex arbitrage as well. But again like we, we didn't feel like that is the future of what we want to do long term. Like we were always very much driven by the technical challenges and just being very fascinated with this entire new world that has opened up and never existed before. But we were always wanting to do something bigger that was more meaningful and we were kind of always looking out and always having also our Eye on the Ethereum ecosystem, specifically Ethereum Mainnet, because that is where most of the activity was happening in general in terms of liquidity and TVL and all of that. Most protocols emerging and most also evolution of the market structure because that was the most mature market overall in the ecosystem. And so when the transition of proof of work to proof of stake happened during the merge and with the introduction of pbs, so proposal separation, we got very much red pilled by a few months earlier actually by Vitalik's endgame post where he essentially talked about the fact that you do have these centralizing forces which we were very aware of because we are playing some of these games ourselves. And that for the future of blockchains is actually beneficial if we leverage decentralized actors as long as we have decentralized oversight and enforce the rules that we want to enforce given the outcomes that we want to have with like the entire ecosystem. And so PBS made a lot of sense for us. Obviously there are a lot of implementation details that you have to get right and you know, it's not perfect yet, but it really made a lot of sense for us. And we also realized that we would be in a rare position to actually be really good at this. And the distinction we also made was that transitioning to become a block builder given like our understanding of MEV searchers, what their requirements are, because we were a searcher, it was also very important to us that we stopped searching ourselves. So if we actually do block building ourselves, that we don't actually compete for the block space that we offer to our clients, so to speak, which are searchers users and all other kinds of block space consumers. And so putting that all together, it was like, okay, this is an opportunity to leverage all the learnings in our journey across time in crypto, to actually channel this into something that could be long term, very sustainable, is more collaborative, and also is at the end of the day net positive and not just playing a zero sum game. And yeah, when we had that aha moment and there's a lot of brainstorming, how could this actually be something that is sustainable? And how do you actually generate a business that's commercially viable based on that, we made a decision and became a block builder. **Speaker C:** Yeah, awesome. And, and I really want to get back to this, this idea that you talked about where like when most people think about MEV and the MEV supply chain, like it's in the name, it's extracted value and, and people think of it like whatever's going on here, like it's probably not good, but I think it takes like an educated person and a true believer and someone like yourself to understand the entire supply chain and think like, no, no, there's still positive sums to sor games to be played here. And it's about building a system that like, not only allows for positive sum, but like, you know, the, the natural glide path is positive sum, as opposed to where we were going before, kind of like PBS was on the table, which was like, it's a simple system, it works. And we're just gonna pretend like that all this terrible stuff is not happening under the covers. Right. And so anyway, I want to get back to positive sum a little bit later, but I think now is a great time to talk through, like, what MEV supply chain. And I think that's like a huge question. And it's especially challenging in MEV because it depends if you're talking about in the pre Flashbots era, in the current era, or in the PBS era. But I guess just for the sake of simplicity and ability to communicate over podcast, can you maybe walk through, like, what is the MEV supply chain? Like, who are the key players and which pieces does Gattaca have, like a product to. To be part of the supply chain? **Speaker A:** So, like, it starts from the user, and let's say the user is someone who wants to execute a swap on, let's say Uniswap V3 and basically has this intent to create a swap and then interacts with a dapp. And let's say the DAP is, as I mentioned, Uniswap interacts with a wallet, let's say Metamask or your preferred wallet wallet, and that already has multiple parties in the supply chain. So you have the user, you have the dapp, you have the wallet, right? Okay, now the transaction actually gets signed, you know, created, and then you have mempools, and today you have private mempools or public mempools. There's still a significant amount of transaction in public mempools, but more and more of the transactions are going to private mempools because, you know, it leaks data and leaves potential users up to being attacked through front running, sandwiching, other kinds of things. And so now you have the mempool layer, and as part of the mempool itself, you can have RPC providers that are part of the public mempool and nodes obviously in the network, but you can also have private mempools. And these are services essentially just house the transaction and forward them to the next participants, which can be either searchers or builders. And I'll elaborate, but there are forms of private mempools that essentially are order flow auction platforms, or OFAs as they can be termed. And you essentially have searchers competing for the right to be able to capture arbitrage after a user's transaction executes. It could also be another thing. For example, you could put an Oracle update through an OFA and then when someone liquidates the protocol, that value gets kicked back. But essentially a platform where a transaction can be sent to and different actors, mostly searchers, can compete for the right to be able to execute some sort of value capturing transaction after the user transaction. Then usually the winner of that auction then gets a bundle which is the originator transaction as the searcher transaction sent to the block builders. And the block builders are essentially, the main job is to aggregate all these sources of transactions from public mempools, from aggregators, from OFAs, and maybe directly from trading firms and searchers and all different kinds of actors, L2s, consumers of block space, so to speak, and then sequence these transactions in a way that maximize the block reward. And then once these blocks get created, you then participate in another auction through a relay. And the relay basically is an interface between the proposers and the block builders. And the proposers auction off the right to build a block, to build block builders. And again, whoever builds the most valuable block in terms of total block rewards then earns the right. And then the relay essentially chooses the most valuable block on behalf of the proposer. The proposer signs off on that specific block, and that block then finally gets propagated to the network, at which point you have other validators that will attest to the block and consensus happens and it gets added to the chain. **Speaker C:** So total mess. Let me just try to summarize and then we'll hone in on the parts that are relevant to this conversation. So starts with a user, whether that's me doing something on Uniswap or Jump Crypto, like doing a massive, like high frequency trade. That transaction goes to a wallet. And by the way, the wallet is really two entities. It's the wallet and the RPC provider, right? And then from there it goes to the mempool, which the mempool can be the public one that we all use, or it can be like many different types of private mempools, right? And all of this is basically pre Gattaca, correct? Like none of these pieces is really where you guys interact with the supply chain. **Speaker A:** So we are actually in the process of also launching like a private mempool product, but that's, we haven't publicly released it yet. **Speaker C:** Alpha, Alpha for something you can't get exposure to. Great. So okay, got it. So that's how kind of like transactions appear to be like ordered and eventually make it on chain. So then we have these entities called searchers. And I think we all know that searchers are like the people that go into the public mempools, the private mempools and then try to create these bundles which are like opportunities for, you know, from their perspective, for value to be extracted. From the user's perspective, it's just the order of transactions so they can appear on chain. But the point is, is that the searchers are creating these bundles and then sending bundles over to the builder in which the builder is assembling the bundles. So is that correct? **Speaker A:** That's correct. **Speaker C:** So something super interesting that you said is that when you guys as Gattaca decided to get into this game, you found it would be, you decided it would be very important to not participate as a searcher, only as a builder. That makes sense to me, right? Like you don't want to like compete against your own customers, but on the other side, like what is a builder if not just like a searcher for searchers? And, and I guess put another way, like if you're saying you're not a searcher, I guess that makes sense to me. But like if you see three bundles and realize that like if you combine them in a specific way you'll get more revenue, doesn't that essentially make you a searcher as well? **Speaker A:** Yes. So it is more of a generalized searching problem where like usually searches, as I call searches are usually traders or trading firms that execute specific strategies. And so you know, as specific strategy could be for example atomic arbitrage, it could be non atomic arbitrage. So you are arbitraging, let's say on chain dexes versus centralized exchanges. It could be being a liquidator. So you look for positions that are under collateralized and you know, buy back the collateral and all of that kind of stuff. But which is a value capture opportunity. So these are very specific strategies which require specific trading knowledge integration with specific protocols, understanding like prices, movements of assets and all of those kind of things. Specifically in the case of non atomic arbitrage, also taking on like a lot of risk in some of these cases, managing collateral, having a lot of AUM and all of those. So you are a proper trading firm. Meanwhile as a block builder, as we see it and you can, there are some very synergetic effects if you're both a block builder and a searcher, because you basically can have a look at all this flow you're getting and can trade based on that flow and you can have better execution and a ton of other things. But a block builder, as I see it, is basically this service provider that makes sure that for all the transaction originators or consumers of block space, you maximize their inclusion because that's what everyone wants at the end of the day, get included on chain. And then on the other side of the market you have the proposers where you're basically servicing them from the perspective of creating the most valuable block, which requires a lot of sophistication and infrastructure and simulations and all of these things. And you're basically serving this two sided market and providing the best service for both. And if you're really good at it, that's when you are able to produce a lot of subsequent blocks. **Speaker C:** And so I apologize if this question sounds condescending because I mean it completely opposite. But like what does a builder do that's not like I could totally imagine in this construction. All a builder does is receive these bundles sorts by like amount of priority fee and then just like orders them in direct like descending order. So I guess my question to you is like what differentiates a good blockbuilder like Titan Builder who's able to capture like over a third of the market versus someone who would naively say like hey everyone, just send me your bundles and I'm just going to put them in order based on priority fee. **Speaker A:** So there are multiple factors. So I think the, the, the most important one is order flow. So without transactions to actually build the blocks, you will not be able to competitively build blocks. So that's just very basic. So once you have order flow and are somewhat on par with other block builders, ultimately you want to be at a stage where you have order flow that not necessarily everyone else has, because that leads to even more valuable blocks. And we can talk about that as well. Then it's a function of the latency and throughput of your infrastructure because the way we think about mev on Ethereum, you have 12 seconds and it's like an eternity from an HFT perspective. But in reality, at the start of the slots you only have a very few transactions. And then as the slot progresses and you get towards the end and the beginning of the next slot, which is the time for the block proposal, more and more transactions come in in real time. So depending on the type of MEV specifically, let's say for CXDEX arbitrage, you want to send your transaction as late as possible because that minimizes the risk of you being wrong about the price of execution on chain and off chain. So that in itself requires you to push the boundary as as far as possible. And if you're really good at minimizing the time, usually you will have higher value blocks just based on CXDX arbitrage. But this also applies to other kinds of arbitrage, even atomic arbitrage, because the atomic arbitrage problem is basically an on chain search problem. And the more time you have to find like different paths that basically could cover a more profitable route, that usually that also leads to more profitable blocks. And then if you combine all of these things together, because you have a lot of transactions coming in in real time towards the end of the slot, obviously you also have more transactions to search through. So in general you have this problem where at the end of the slot you want to wait as, as long as possible, and then you have a lot of information to sift through and process. And so latency is very important, even though you have 12 seconds. So latency overall. And this is everything from sourcing transactions, network latency, processing your mempools and all of those things to the second part, which is very important for block building, which is basically simulations. So these transactions come in, but you have no idea what these transactions do or how much they actually pay. And how much they pay also depends on what position the block they land. So if you approach this problem very naively, you would want to sort of try all combinations and pick the combination that is most profitable. And then the faster you are doing these simulations, the more possibilities you can try. So that's one thing. So simulation speed is very, very important. And the final bit is basically what people call bundle merging or transaction sequencing algorithms. And this is basically how you try and limit the search space. So, you know, you don't want to brute force everything, but if you have some smart algorithms, you can basically choose or predict what kind of sequences will be most likely more profitable. So I think that's on a high level. And then obviously we could go into a lot more details. **Speaker C:** Yeah, man, this is going to be a tough, strange water episode because everything you say just launches my brain into like 50 new questions and directions. And there's just so much I want to talk about, but we'll try to go in order here. So the first thing you talked about when we're talking about building a differentiated block builder is about order flow. And I guess like my, my first question to that is when we're talking about building a block building company, we're talking about Gattaca here, not about Titan Builder. What? Like, first of all, like, are you making individual relationships with like traders and proprietary firms and like huge liquidity providers that says like, hey, only build bundles and send them to us, like do not send them to our competitors or whatever. But if, like, if you only search for us, like, you know, maybe there's an incentive or there's some sort of benefits. But I guess like at the very basic level, when you're talking about private order flow, like how do you as a company go about securing that? Like, what does that mean? **Speaker A:** Yeah, so first of all, it is all about trust first because we as a block builder centralized entity and we could do in theory very bad things with the bundles that are being sent to us. So we could unbundle, we could front run, sandwich, steal MEV from people and all kinds of things. So the first thing is trust. And how do you establish trust? So first of all, by being in the space and having a track record of having multiple high value opportunities of potentially stealing MEV or doing nefarious things and not doing it, I think that's the more critical one. And as you operate in a space and different kinds of projects are familiar with you, naturally trust happens. So that's one thing. And it's also just a flywheel effect of the longer you are in the space and not doing bad things, the more people will trust you naturally. So that's one thing. And then it's also people knowing about you because if, you know, there are a lot of entities, searches and wallets and all kinds of providers that send us order flow and we have no idea who they are because we have a public permissionless endpoint which is, you know, normal in blockchains. And people just use us and they know us because we have been around for a while, have a significant market share. So another big important part of getting private order flow and then the, the next step or what we focus on essentially is building out products that are value add for specific kinds of consumers of block space. And that's when it becomes a bit more of a relationship kind of thing. So for example, we have been spending a lot of time developing features for CXDEX searchers because the most competitive CXDEX searches currently are builders as well. So they are competitive block builders. So the two other larger block builders in the space. And this just when you are the builder and the searcher yourself, you have certain advantages. So we essentially try to build certain kinds of products into the builder that will give like people not vertically integrated the same kind of advantages and that naturally then attracts different kind of flow. And even from the perspective if you have better execution in terms of latency, that means you can price for example, your transactions differently. Right. So if you have a very slow builder, you have to price your transactions or your builder tips differently than if you have a very fast builder because the EV on your trade is different. So in theory that searcher might send the same kind of trade to different builders, but because we can process it faster and you can price more aggressively, we have more valuable flow. Right. So the way we basically think about is how can we unlock more value by building different kinds of things into our builder so that naturally the overall block value is higher, which makes us then more competitive. **Speaker C:** And would you say like roughly just like off the top of your head, like, what percentage of Ethereum transactions come through a private channel versus the public minpool? **Speaker A:** Oh, I would need to look at a chart. **Speaker C:** But are we talking like 10% or 50%? Like what order of magnitude are we talking about here? **Speaker A:** I think the last time I looked it was around 15, 20%, but could be more. **Speaker C:** Now, and I understand that you're a software developer first and a finance person second, but based on your understanding of how tradfi works, like where do you expect the private order flow, like percentage to kind of stabilize up? **Speaker A:** I think most type of transactions that could potentially leak MEV will go private. There's just no incentive other than unsophistication to send it to the public mempool at the moment. **Speaker C:** Yeah, makes sense. Makes sense. Cool. So I think we've talked a little bit through block building. I would love to hear any kind of other kind of basic kind of not we're in that weird area. But anything else you'd like to say about block building? And then I'd like to move us on to the relay portion of the MEV supply chain. So quick pause. Anything else that is worth talking about on the block building side? **Speaker A:** I mean, I think there's probably like a lot, but yeah, I will leave it, I'll leave it to you to ask questions. **Speaker C:** Okay. **Speaker A:** Okay. **Speaker C:** All right. So yeah, and again, I think first I just want to kind of walk through the MEV supply chain and then we'll talk about some of the big things in front of us. And you've already by the way, talked briefly about one of the biggest thing, which is the delay inclusion. But let's, let's wrap up the supply chain and we'll talk about relays. So first I think it might be helpful for you to describe what a relay is, but within the context of why did we need relays within the flashbot MEV boost paradigm. And I think we have an interesting conversation about the future role of relays as they become more embedded and we probably won't be able to get rid of them, but at least in the first initial sketching of pbs, why do we not need them according to the spec? **Speaker A:** So actually in the original spec of PBS there was no relay. So I thought you were going there. But actually then when we were or the ecosystem actually tried to build this out, we realized a big problem of trust. And so because both the proposer and the builder could potentially screw each other over, there needs to be an entity that can be trusted. So if we want to keep the proposal set, decentralized, and there are almost a million proposers on mainnet now, the proposer could potentially do very malicious things. So for example, if I build a block and I give certain guarantees to searches to send bundles or other kinds of participants, and I just give the block to the proposer, the proposer can in theory just take the block and, you know, capture all the MEV themselves after you've done all the heavy lifting, or steal MEB or screw users over all kinds of things. So if you can't trust the proposer, that's an issue for the builder. The same the other way around, because the builder actually builds the entire block and the builder says, hey, the block is worth, let's say, 10 ETH. But then if I sign off on it without knowing what the actual content is, and if it's actually worth 10 ETH, then the builder can obviously grieve the proposer, right? So there's this trust problem and that's essentially what a relay solves. It's basically just a coordination mechanism so that proposers can source these blocks and the builders can basically sell the blocks or buy the right to build the blocks from the proposers without getting screwed over. **Speaker C:** And you use the magic word during this, and you also used it when we were talking about private order flow. And I just find it so interesting that the deeper I get into this space of trustlessness, it kind of turns out that everything important rests on trust. And so I don't really know what that says about this space. But like, it is just like so interesting to me that like we're building a system to create literally trustlessness and like what are the most important things to have a trusted relay or else the system breaks down. **Speaker A:** I should caveat actually that the way the relay ecosystem is evolving is that trust actually will become less important. So already relays are essentially proposing or are processing blocks from block builders, optimistically. And they do this by having builders lock up collateral so that they can be slashed and then their designs and in a way where you don't even need like the builders will still need to lock up collateral, but you won't need a relay to actually enforce this. So they actually designs where we can get rid of the relay. But in that world, the only reason why the relay is still useful is no longer because of trust, but because it solves a coordination problem. And the coordination problem is the all the proposers having connections to the proposers and then being able to the block builders, being able to communicate with the proposers and then also which you can in theory do through a P2P layer, but by having a centralized relay, even though you don't need to trust them necessarily, you basically solve a latency problem that you would have if you go directly by the P2P layer. **Speaker C:** Yeah, and I think that always when we have trust problems, right, like the goal of this space is always to replace trust with cryptography and crypto economic guarantees. And by the way, that is why like the Eigen layer moment is so closely tied to the ZK moment conversation for another time. But I. So, so just to be clear, what you're saying is that like let's imagine this future world where we've solved the trust issue on the relay, but it still serves a useful purpose in that each ethereum proposer won't have to connect to every single block builder in order to find the best block. Like there's a single coordination mechanism. I guess my question to you is, doesn't that imply that there is a single centralized relay? Because what we have today is like basically an equivalent number of block builders in relays. Like I don't really understand how we're getting any benefits from that. **Speaker A:** On the relay front, I think most so some relay operators actually self capping so that they could in theory have more market share because they're more performant than others. But as part of being more aligned with the ecosystem and understanding that there's more robustness in the system overall if it doesn't all go through a single relay is an incentive for that specific entity to self Cap. But yeah, like the nature of latency games naturally have like a power distribution, power law distribution. Right. And so naturally it just gravitates towards very few entities that will be very sophisticated and like be able to optimize all these different kinds of problems in order to keep pushing the boundary and being competitive. **Speaker C:** I guess this is a clunky segue into like the Titan relay, but I guess as of right now, none of us really understand where the value capture in relays is yet. They're kind of like a altruistic service needed in order to make like the two money making sides of the equation work. I guess, like I would love to hear why did you guys decide that you needed to build a relay? And how much of that was solving a technology problem that just needed to be solved and how much of that is looking forward and realizing that while there's no value capture here today, this is clearly where a lot of value is going to sit in the future and we need to like not get caught flat footed on this. **Speaker A:** I wouldn't be able to quantify the breakdown across these two, but it certainly is both. It started off initially just as a defensive and move and as a technological problem that we needed to solve. Just because we, as I said before, we shifted our entire business into being a block builder which very much relies on the relay ecosystem. And there were issues that we were seeing in the landscape, even though like existing relay operators do tend to push the boundaries and innovate and there are certain problems that we think we could solve better. And then also because there is this pressure to vertically integrate and we had heard rumors that like the our biggest competitors who are already vertically integrated, as a searcher and a builder, we're also going to start a relay where you have searchable relays. And so we kind of wanted to front run that specific scenario and launch a relay that is really, really competitive. Because if you have a relay that is really, really competitive and just from a latency perspective, and there are other things you can do other than latency, but just from a latency perspective you sort of almost commoditize the latency edge and then there's no longer a reason or the incentive to actually go out and build a new relay and bootstra up this ecosystem with all the proposals, it's not really there anymore. So we kind of wanted to front run this. **Speaker C:** Got it. You want to just build the best one so no one else bothered and we could just move on from this conversation. **Speaker A:** Correct, correct. Because it's actually one of the key capabilities that we have as a company. So let's leverage that. **Speaker C:** Awesome. And I guess final thing on the relay here is again, I think we're all realizing that although the original PBS specs didn't account for realize that like they're not going away. And I can imagine a world where they really just are this like coordination point between, you know, the millions of proposers and like unfortunately like two to four block builders that we're going to have. But fortunately for you, but I guess as you look forward, do you really see the relay just kind of like settling into this like very important but minimalist functionality, or do you see the end game state of relayers as serving more purposes in the ecosystem, whether that's supporting other parts of infrastructure or providing more opportunities for MEV or proposer value or I guess while we're still in this primordial stage of figuring out what the point of relays is, do you have any thoughts or predictions on what final state relay looks like? **Speaker A:** Yeah, so I certainly strongly believe that the relay will act as entity in the supply chain that is going to do more than just relaying blocks today as they do today. I can't speak too much about the things of specific details because I think it's too early to talk about publicly yet. But I strongly believe there's a lot more opportunity that's not actually directly MEB related and more of a generalized Ethereum infrastructure play. **Speaker C:** Damn. Well, you got me intrigued. I guess we're going to have to have you back. Cool. All right, so I would love to kind of pivot the conversation now to talk about like some of the like the big hairy conversations that we have with like MEV and block building and all that stuff. And I think the best one to start on is one that we've already kind of danced around a little bit, which is the inclusion delay. And so I guess real briefly I'll describe what, what, how I understand what the kind of issue is. And then I would love to hear from your perspective as a block builder. One, am I correct? Two, like, do you think that this is a real problem and whether or not you think this is a real problem, how do you think of building a block builder with this new meta in mind? So real briefly, as Kubi said earlier, like, what we're all realizing is that the longer you wait before you propose a block, the more opportunity there is to extract value. And like at the very basic level there's just like more transactions for you to mess with the order with. But there's also like more complicated stuff like, you know, the price moves only once every 12 seconds on Ethereum. It moves every nanosecond on a centralized exchange. And so you have less information if you propose at the beginning or sorry, if you create a transaction at the beginning of the 12 seconds versus the end of the 12 seconds. And so there's more value in being later. The problem is that if you're too late with your block proposal, then you're going to miss your slot. And if this happens too many times, we really risk threatening the stability of Ethereum itself. And so what the debate has kind of come to is we're one, realizing that these, these delay games like have implications for the security of Ethereum or sorry, the stability of Ethereum. But two, we're realizing that like latency kind of is a proxy for how much resources you have. And how much resources you have is like another way of saying how centralized you are. And so like another fear, let alone the stability of Ethereum. But this inclusion delay problem is going to have like inherently centralizing pressures on, you know, the, the block building layer of Ethereum. And so the question is like, what do we do about this? And so my question to you is one, is that like a decent understanding of what the conversation is and to like, do you think that this is a real problem and something that needs to be thought through or is this just kind of like people who don't understand the minutiae, like looking under the covers and getting scared? **Speaker A:** So I think it's a good framing of the problem. I think there's something I would add specifically in regards to sort of the liveness or the robustness of the network being impacted by some of these timing games. So the issue is that the risk for the entity that is, let's say it's delaying the proposal of the block in order to maximize value is playing what you call sometimes in the market making game like picking up pennies in front of a steamroller, right? So because you might marginally, let's get another percent for every, let's say 10 milliseconds or so, but then you miss the entire block and you get nothing. Right. So I think there's a natural incentive for the different entities to actually play timing games, not to push the boundaries too far because actually it will be net negative for them. Right. So I don't necessarily think it will be an overall liveness problem for the network. We've seen some other funny time side effects of this, which is, for example, for proposals that are not very sophisticated like at home stakers, for example, if your network connectivity is not good and you push the, the previous block proposer pushes the boundary too, too far, even though that block will actually still get included. But because the attestations happen later, that proposer actually doesn't see that that block got enough attestations. So we'll then start building a block on top of the parent, the previous parent, which will then lead to them being reorged because that was actually not the actual canonical parent that they should build on. So there are some other side effects that we are starting to see now and it's still somewhat early days and all that to say it is definitely a problem that people are thinking about. Hardly. Mostly the ef naturally. I think there has been realization that block proposal doesn't necessarily need to be done by the validators itself. And you know, there are different forms of proposals actually that come about like execution tickets or slot auctions or different kinds of mechanisms, but actually in order not to impact the validators which are really responsible for the oversight of the network, it is basically a legacy thing that validators are still actually the ones that are proposing the execution payloads. So maybe we can come up with systems that actually solve this problem somehow. And you know, lots of big question marks around that, what that would actually look like. But I think that's a realization that is getting more and more traction and I'm quite excited about potential ways of solving that problem just based on that by separating those worlds out. **Speaker C:** Yeah, that's super interesting. So I think what you're saying is that the way it works today is like, okay, so Titan Builder will build a block, will send it to the relay, the relay will send it to the proposer, the proposer will receive the block, throw their signature on it and then send it to Ethereum network where it's confirmed. And what you're saying is that we're realizing that that's like pretty inefficient and instead it can, when it's the proposer's turn, they can like kind of signal backwards through this supply chain to say like Titan Builder, we choose your block. And then instead of the block going through the supply chain, Titan Builder could send it directly to the network and then it is that kind of the idea. **Speaker A:** So it goes even further than that. So the way it works today is like you said, the proposer doesn't even see the block. Right. The proposer blindly signs off on a bid on a value. Right. So why do we need this proposal to sign off on the value of a block that they don't even know what the content is. Why do that in the first place? So what about if the protocol itself, for example, auctions off the right to be a proposal in the first place, right? So the different validators to do their testing and all different kinds of things, but they don't actually have to be the entity that then signs off on the proposal. Right? So just like disconnecting that completely from the validator is the thought process. And then there are different ways of how you could potentially do this, which is. Yeah, another rabbit hole, man. **Speaker C:** That is. Yeah, I'm literally just going to hard pivot right here because that's so interesting. And so, Greenfield, that I could keep us on here for two more hours. So anyway, another thing that I think is worth talking about is we on outside of the MEV community look at just like the numbers and the market share numbers and, and we think, like, it's easy to look at what's going on in MEV and think that this is a huge centralization risk. And like, what's the point of like doing all this stuff with millions of validators when it turns out there's like one or two guys building all of the blocks that like, then we just like, as you say, like, get like random people to blindly sign off of, like, kind of what's the point of all this? And so I guess my direct question to one of these entities is, like, how do you think about the work you're doing and the implications for like, core protocol mainnet centralization? Is that something you worry about? And if it is, like, how do you, you know, like, point your company in a direction that doesn't like, end up eating the thing that you care about? **Speaker A:** So I think when we talk about centralization, we should talk about what exactly is the problem about centralization, right? So, for example, like the, you know, the biggest one, like, at least from my perspective, is like censorship resistance, which is. Which is something we care about. And we are currently trying to, for as long as possible, not needing to censor transactions. And we are one of the last remaining larger builders, actually dozen censored transactions. But I think it's quite important that actually on a protocol level, if you sort of outsource the task of block production to entities, whether it's one entity or more, the protocol still retains the oversight and a way to enforce the properties that it wants the protocol to have. And so I think the latest, I guess, efforts by the EF to battle censorship resistance or Censorship is inclusionless, which might hopefully make it into the next hard fork Electra. But I think rather than saying just putting it in a box and saying centralized is bad, what about centralization is bad? Is it the robustness, is it uptime, is it censorship? What are the specific properties? And then let's design the system in a way that those properties that we don't want, we can enforce them, which is what we can through the validator set and correct protocol rules. That's how I look at it. And also that's how we engage with the EF and other ecosystem players to try and think about those kind of problems. **Speaker C:** Yeah, I think that's super fair. And let me ask you this big question and I'll just spoil the punchline, which I think the answer is yes. Right? But do you think a world in which there's just one single block builder but every proposal has the ability to self block build and has, you know, access to CR lists or inclusion lists or whatever? And I guess, sorry for the audience what inclusion lists are just the ability for individual proposers to say, I'm going to take the block from Titan Builder, but I also like require you to include these transactions and each individual proposer can decide what these transactions are. Like myself as a home staker, not really worried about the government reverse engineering my signer keys to find my address. So I'd be like, I believe in Ethereum, I want to allow OFAC tension addresses. So my inclusion list would be even if another builder doesn't include OFAC sanctioned addresses, I want to include them in mine. So anyway, do you believe that an Ethereum that has a single centralized block builder but has inclusion lists and the ability for proposers to self block build, is that congruent with the world computer and is that okay for Ethereum or do you think that that is an example of an Ethereum system that has been captured by centralized forces? **Speaker A:** I, I don't actually think that such a world could come into existence because even today like we, let's say we have two, three builders that are building most of the blocks, but you still have a long tail of builders that as soon as any of the block builders goes down or has a bug and comes a little bit less competitive like other markets, other builders immediately gain market share and this has been going on for months. So I do think that like the more consistent larger market share is going to be captured by very few builders and just because of specialization, most likely it will not be one. But even if like the short tail is really captured by one, like, big block builder. As soon as there's an issue, there'll be lots of other block builders that immediately gain market share. So I don't think it's realistic that they'll exist. **Speaker C:** Yeah, all right, good answer. So, okay, two more subjects that I want to just like, touch briefly. And I know we're running out of time, so we'll go. Quick one I want to talk about. So what I love about Ethereum is that they're literally telling you, like, on YouTube, what's coming in the future. Like, imagine if like, Elon Musk, like, did his, like, R D stuff, like just out on YouTube and we could all watch it. And so we've been looking at PBS. **Speaker B:** For a long time, and the cool. **Speaker C:** Thing about PBS was this concept was created to deal with mev. And then we realized that with this new paradigm, this opened up dank sharding. Like, we needed proposer builder separation in order to, like, make blobs possible. And so my question for you, like, what, do you see any other, like, interesting opportunities that proposer builder separation has created for you that like, maybe people that are not, you know, like, elbow deep in the mempool and don't really understand, like, how core Ethereum works? Like, don't really understand yet. **Speaker A:** So one interesting one that has been getting a lot more traction recently is sequencing. So, and specifically base sequencing or the L1 or Ethereum itself becoming a sequencer for the L2s, which requires a lot of sophistication, again, because now you're not managing state only for one domain, but for multiple domains. So, you know, you can think about that complexity. And because PBS already exists and has certain kind of actors that have already solved this problem, like in one domain and are capable of solving this across other domains, it actually opens the door for the L1 to become competitive, to actually be a sequencer across and provide that service to L2s. For example, that's one very interesting one that we've been spending more time on recently. **Speaker C:** Yeah, that's very cool. And you know, like, the whole idea with the, with dank sharding and how that transform Ethereum is that like, each blob, like, let's consider each blob like its own L2, right? And then there's 64 blobs per block. So we have like 64 different L2s going on at a time. And then like the question then becomes like, okay, well, like the EVM itself, like, what's the difference between the EVM itself and that state and like the state that's contained on a blob. And so I guess in this endgame Ethereum that you're talking about, basically the capabilities that we developed on Ethereum mainnet become applicable to everything else. And on the flip side, Ethereum mainnet just becomes another computing environment just like all these other L2s. And so, yeah, I didn't think about this. This is a really cool thing that PBS unlocks is for the ability to just build your shared sequencing directly into like literally mainnet. Very cool, very cool. All right, last, last question and then I'll let you go, but I would just love to hear from you, like when all of the block builders get into your room and for all your like crazy little block building part MEV parties, like, what is the thing that's most exciting and like most interesting on, you know, like the, the medium to long term roadmap of Ethereum? Like, what, what are you guys looking towards? And like, how do you think Ethereum is going to transform in a way that we don't really understand yet? **Speaker A:** I think what I find most fascinating is the evolution of the market structure. And it has become quite apparent, like as I said before, for example, that the way proposal of blocks is being done today is actually not optimal or far from it, and is actually having negative side effects on the network itself. And so thinking about a world where the market as it exists today and proposes are no longer validators and maybe it's a new entity or maybe the protocol is selling directly the right to propose slots to, let's say, builders or other kinds of speculators. Maybe there's a block space futures market and you have some trading firms that load up on these futures and then sell them to builders in real time to actually build the blocks for them. Just thinking about what the possible scenarios would be and how a builder like ourselves fits into that picture is very interesting. And then as I said before, also this whole idea of doing sequencing across other ecosystems and like unifying that into the L1 is also very exciting for me to think about. **Speaker C:** Yeah, very exciting. All right, Kubi, thank you so much. We're already over time and I, I'm gonna stop us here because like, we didn't even touch like one third of the interesting boxes that you pointed to. So much appreciated. We gotta get you back on the pod, but I just gotta say thank you. **Speaker A:** Yeah, thanks for having me. **Speaker C:** So before I let you go, just for the audience, can you let them know where they can find you, where they can find Gattaca or Titan Builder. And if they're interested in learning more about how block building and how the MEV supply chain works, do you have any suggestions on where to get started? **Speaker A:** Okay, so let's start with Gattaca on myself. So I'm just on Twitter, so my DMs are open as well, so feel free to message me. So just Kubimitza on Twitter. So Gattaca or Titanbilla specifically just Titanbiller xyz, our website and have a bunch of docs on there. It's actually surprisingly hard to find any good information in a coherent way like online about PBS and like the whole supply chain. And also because it keeps changing so often, like most of the stuff is then outdated, I think I recently came actually across a project that is feeding a lot of content into ChatGPT and you can just chat with it and it will give you the latest answers, including videos and talks and panels from like conferences. I don't have the link top of mind, but maybe you can share that later. **Speaker C:** All right, Koovy, thank you so much. Really appreciate it and have a good rest of your day. **Speaker A:** You too, man. Cheers.