Earn PBS-enabled MEV rewards with Coinbase Cloud
November 1, 2022
By Viktor Bunin, Senior Protocol Specialist at Coinbase Cloud
Tl;dr. More rewards are available for those staking ETH with Coinbase, made possible by MEV-Boost from Flashbots. Coinbase Cloud ETH staking customers can now opt-in to run MEV-Boost in their infrastructure. Prime and Retail customers who are staking ETH will earn additional rewards automatically.
Flashbots’ MEV-Boost is now live for Ethereum stakers via the Coinbase Cloud platform. This feature allows any Coinbase Cloud ETH staking customer to opt-in to receive MEV (maximal extractable value) rewards enabled by Proposer-Builder Separation (PBS). Coinbase Prime and Retail customers who are staking ETH will be opted in to earn these additional rewards automatically.
Although PBS-enabled MEV rewards vary significantly and are not set by Coinbase Cloud, public dashboards and estimates show a potential increase of 100-200% in average block rewards earned.
MEV-Boost lets validators outsource block construction to a competitive marketplace of block builders, and accept the most profitable block construction from relays. MEV-Boost is designed to enable all validators to receive PBS-enabled MEV rewards, rather than a small number of large, enterprise validators. This is important because it promotes greater security and decentralization of the network.
We support the work Flashbots is doing to mitigate the negative externalities posed by MEV to Ethereum. We’ve been collaborating with the Flashbots team for more than a year, and helped create the Flashbots Eth2 Working Group to ensure MEV-Boost has the right stakeholders involved in its design, testing, and implementation.
Although MEV-Boost may not be a perfect MEV solution, we believe it makes the right tradeoffs to benefit Ethereum’s validators, network, and users while other solutions are being developed (see: SUAVE):
Validators may permisionlessly leverage MEV-Boost without needing to be whitelisted, enabling solo stakers to earn competitive rates of reward alongside large node operators
Ethereum continues to become more decentralized and credibly neutral thanks to a thriving solo staker community earning competitive rates
All Ethereum users should pay lower transaction fees because competition among searchers is handled via the MEV-Boost system rather than PGAs.
How does Flashbots’ MEV-Boost work?
With MEV-Boost, Ethereum validators can earn MEV rewards enabled by Proposer-Builder Separation (PBS). MEV-Boost is the Flashbots-developed system that attempts to enshrine Proposer-Builder Separation (PBS) to the extent possible without requiring a modification of the underlying Ethereum protocol. MEV-Boost enables validators to outsource block construction to a competitive marketplace of block builders.
MEV-Boost is free and open-source software that serves as middleware, essentially enabling communication between block builders and validators via relays. The MEV-Boost architecture consists of different actors – searchers, builders, relays, and validators.
Searchers are specialized Ethereum users, such as traders, that find profitable transactions and attempt to have their transactions included in a block.
Builders are entities that invest in specialized hardware necessary for resource-intensive block production.
Relays are entities that are responsible for collecting blocks from multiple block builders and selecting the most profitable one (determined by the builders’ bids) that meets their criteria to send to a validator for proposal.
Validators subscribe to one or more relays using MEV-Boost and propose the most profitable block of the ones received from the relays it is subscribed to.
With MEV-Boost live on the Coinbase Cloud platform, Ethereum staking customers can opt-in to receive additional rewards, while contributing to Ethereum’s security, decentralization, and credible neutrality.
What are PBS-enabled MEV rewards?
All Ethereum validators already earn MEV rewards from arbitrage, liquidation, etc. activities on Ethereum in the form of regular transaction fees. MEV-Boost does not make validators engage in MEV, it improves how validators engage in MEV.
We use the term “PBS-enabled MEV rewards” to refer to rewards earned from the use of the MEV-Boost software. When using MEV-Boost, validators receive a lump sum payment of fees for proposing a block without a breakout of fee sources, such as tips from regular vs MEV transactions, or payments from searchers. Validators also do not know what they would have earned if they instead proposed a block without the use of MEV-Boost. As such, it is difficult and inaccurate to use the term “MEV rewards” in this context. Hence – PBS-enabled MEV rewards.
How does Coinbase Cloud select relays?
Relays are trusted actors that enable validators and block builders to interact trustlessly. For example, relays ensure that validators cannot “steal” MEV from searchers by copying profitable transactions, that the block proposer is paid what they were promised and that, once a proposer signs a block, that block is published to the network in a timely manner.
Relay diversity encourages decentralization and censorship resistance. In keeping with this principle, Coinbase Cloud will aim to subscribe to all viable relays that are operated by known entities and pass our technical requirements. Specifically, relays must perform their core functions reliably–ensuring that block proposal opportunities aren’t missed and that proposers are always paid the promised amount. We are eager to work with any relay operator that can meet these conditions.
In addition, Coinbase continues to operate a number of validators without MEV-Boost. This block-building diversity ensures that no single entity can censor Ethereum transactions. We believe this is the best way to support the security, decentralization, and credible neutrality of Ethereum while aiming to maximize rewards for our customers’ validators.
What’s next
Coinbase Cloud ETH staking customers can now opt in to receive PBS-enabled MEV rewards by contacting their account manager. Rewards will be automatically turned on for Coinbase Prime customers, as well as Coinbase retail users, who are staking ETH.
Interested in Cloud Staking? Contact us to get started.
Reward rates published by Coinbase Cloud are estimates based on publicly available information from third-party sources. Coinbase Cloud has not verified and does not guarantee the accuracy of this information. Reward rates on some protocols may vary based on the amount staked and/or other variables, including validator performance, so you should not rely on the accuracy of any reward rate ranges we publish, which are intended to provide an estimate. The actual rate of rewards earned may vary substantially and may change over time and Coinbase Cloud does not guarantee that you will receive any staking rewards. Staked assets may be subject to slashing penalties and risk of loss is possible, including up to the full loss of principal.
This document and the information contained herein is not a recommendation or endorsement of any digital asset, protocol, network, or project. However, Coinbase may have, or may in the future have, a significant financial interest in, and may receive compensation for services related to one or more of the digital assets, protocols, networks, entities, projects, and/or ventures discussed herein. The risk of loss in cryptocurrency, including staking, can be substantial and nothing herein is intended to be a guarantee against the possibility of loss.This document and the content contained herein are based on information which is believed to be reliable and has been obtained from sources believed to be reliable, but Coinbase makes no representation or warranty, express, or implied, as to the fairness, accuracy, adequacy, reasonableness, or completeness of such information, and, without limiting the foregoing or anything else in this disclaimer, all information provided herein is subject to modification by the underlying protocol network. Any use of Coinbase’s services may be contingent on completion of Coinbase’s onboarding process and is Coinbase’s sole discretion, including entrance into applicable legal documentation and will be, at all times, subject to and governed by Coinbase’s policies, including without limitation, any applicable terms of service and privacy policy, as may be amended from time to time.
