Transcript 0:00 I think all these investors really have had their eye on Bitcoin for a while. The way I see MEV is, yeah, like, there's not a ton of knowledge about it everywhere. 0:09 It's not like you can Google MEV on Bitcoin and see the Ethereum equivalent. That's what makes it so exciting in a way. Uh, my mental-- Like, you know how you have the dark forest on Ethereum? 0:19 Personally, I call it the dark swamp, because it's even darker than the dark forest. 0:24 Uh, you have some analogies to Ethereum MEV that you can see on Bitcoin, but I think there's also a lot of new behavior, and even new behavior that no one knows about, not even us. 0:37 [upbeat music] Welcome back to Bitcoin Season Two. 1:08 Bitcoin Season Two is about new conversations with new people on the oldest blockchain, Bitcoin. 1:14 Make sure to check out other Blockspace Media content like the Gort Show, the Mining Pod, the new Stocks Show, Bitcoin Stocks Show. 1:22 Hit blockspace.media, the website, to see all those things and, uh, get, uh, on the newsletter list. So today I've got Devin from Rebar Labs. 1:34 We met in Nashville, and Rebar is doing some very interesting stuff with MEV on Bitcoin. So we're gonna talk here for a little while. Devin, welcome- Hello. -to Bitcoin Season Two. Oh, hey, thank you for having me on. 1:50 Yeah. Um, so tell me about where you fit into the Rebar team. You guys did a raise. Let's just get... Let's breeze through this really quick. Like, what is Rebar in a, in a few sentences? Yeah, definitely. 2:02 So Rebar is building infrastructure, doing products. We're doing research to explore MEV on Bitcoin and essentially build the, the things that need to be in place for when MEV emerges on Bitcoin. 2:14 And we're beginning to see that happen now with all the programmability that's coming to Bitcoin, all the exciting new things we're seeing on Twitter. 2:21 Uh, so I'm really excited to be working with a team of really, really smart people. 2:25 And I'm leading a lot of, like, the communications, you know, writing the blog posts, explaining what we're doing in simpler terms, um, and of course, hanging out on Twitter for hours at a time. 2:35 That's what I'm doing with my time. Yeah. 2:39 And it's funny because I feel that even, y-you say that they were already seeing some Bit- some MEV on Bitcoin emerge, and it's almost like this, like, the ecosystem is in denial that this is happening. Mm-hmm. 2:50 I don't know if you get this sense, but I-- You know, the very first Bitcoin Season Two episode we did, I had Walt from Cyber Fund and Julian from Enduro come, and we just talked about at a high level, like MEV on other chains, it's on Bitcoin now. 3:04 And so now you guys are one of the first and, like, prominent companies to raise on this topic. How much did you raise, and, like, what's your sense on, like, the landscape of Bitcoin MEV discussion? Yeah, certainly. 3:18 Uh, we raised two point nine million for our seed round from some pretty interesting investors like 6MV, you know, with Dudas and they're great. Uh, ParaFi, Moonrock, UTXO, um, and Arca. 3:30 And I think all these investors really have had their eye on Bitcoin for a while. The way I see MEV is, yeah, like, there's not a ton of knowledge about it everywhere. 3:41 It's not like you can Google MEV on Bitcoin and see the Ethereum equivalent. That's what makes it so exciting in a way. Uh, my mental-- Like, you know how you have the dark forest on Ethereum? 3:50 Personally, I call it the dark swamp, because it's even darker than the dark forest. 3:55 Uh, you have some analogies to Ethereum MEV that you can see on Bitcoin, but I think there's also a lot of new behavior, and even new behavior that no one knows about, not even us, that's emerging because so much of this stuff on Bitcoin is less than a year old that I'm talking about. 4:12 Um, so I think, again, dark swamp, it's swampy, it's dark. Um, I mean, I do have a lot to talk about. I'll kind of let you lead the way with how you want to peel back this onion. Yeah. 4:23 Um, so I think one of the initial criticisms I get whenever I use this hand-wavy term, MEV, um, is people ask, like, "What, what, what do you mean by MEV?" Like, "What types of MEV are you talking about? 4:35 Are you talking about, like, power user-driven MEV? Is this toxic? Is this in private order flow?" Um, when you... 4:44 You know, you guys are, I would imagine, still in the R&D phase, but, like, how would you-- what kind of MEV would you say you guys are seeing or directionally seeing on Bitcoin? Yeah. 4:58 Um, I mean, the first obvious one is sniping, whether it's trades or mints. 5:02 Uh, if you just stay on a bunch of replace by fees or RBFs, then hopefully one of those gets put before the transaction that you're, you know, trying to get ahead of. 5:11 Uh, so if you have, like, a really hypey ordinals collection 5:15 or like, you know, a really hypey ERC-20 mint, that's the most obvious one, and I think that's the one that, like, most people will say, "Okay, yeah, maybe there is a little MEV-esque behavior on Bitcoin." 5:25 Personally, I think that's, like, the lowest common denominator of what we're gonna see in the future, but it's the easiest thing to explain, right? 5:33 Um, I mean, with thing- with side chains, I think there's gonna be, like, side chains or even L2s. There's gonna be a lot of things to unpack. Um, 5:42 I know Blockworks Research uncovered that maybe last year even, uh, that with the stack side chain, they had instances where there was a certain mining pool that was, um, essentially, like, replacing transactions when people were trying to submit, uh, mining proof, I think it's... 5:56 What's it called? Or, like, whatever rewards the stack tokens at the time. And I would argue that's an example of rather obscure MEV that, uh, no one really even noticed until it was noticed, right? 6:08 Um-I think an, an interesting bit that will require a fair bit of research is transaction censorship. 6:14 Like, uh, and maybe it's one thing when you can see stuff happening, but what if there's not something happening, an absence of something happening, which in case would be transaction censorship, you know, or a block is left empty by a miner. 6:27 Um, so the parties involved, I mean, could in some case be miners. 6:31 Um, I think with all the D5, Bitcoin5, SlowFi, whatever you wanna call it, coming, we're about to see a lot more searchers coming into the space, and that's when I see the shadowy cabal, um, slash just like really smart people finding ways to extract value from simple transactions. 6:49 So those are some examples I see now. Um, and something else that I think 6:55 will be one of the first new things to emerge in terms of something to look out for is arbitrage opportunities between the centralized exchanges in Bitcoin. 7:04 Once you have any tokens being traded on a DEX on Bitcoin, also traded on centralized exchange. 7:09 So, like, you know, like I have some like Liquidium runes tokens, because I think the protocol is cool, but I doubt they're gonna be up on Coinbase too soon, unless they are, which would be awesome, but I doubt it, right? 7:20 But considering like the Bitcoin mempool is ten minutes long, there's a lag there, and I think that's gonna get very interesting to see what behavior emerges when you have instant settlement on a centralized exchange versus ten-minute block times or ten-minute mempools. 7:36 Yeah. You introduced multiple topics there, and in particular I think let's, let's just, uh, zoom in on... I don't even know if you zoom in. This is a very broad topic. Yeah. Bitcoin by just DeFi-type behavior- Mm-hmm... 7:49 on Bitcoin assets which are issued on Bitcoin and perhaps have an- they're also tracked or they have a value settlement off chain. 7:58 This is really interesting because when we try to imagine what MEV might look like on Bitcoin, one of the very obvious ones that I see is, well, structurally Bitcoin has a ten-minute block time versus Ethereum's much, much faster one, and Solana, other blockchain's much quicker, uh, block times. 8:16 But on Bitcoin you can have, uh, in between blocks on chain, you can have significant, uh, price movement for these on-chain traded assets. Um- Yeah... 8:31 this is-- I know that this can kind of happen on Eth, but this is pretty different when you look at how it might behave on Bitcoin. Could you give me some color to this and like what 8:43 does this structurally change the MEV- MEV or searcher strategies when we're looking at Bitcoin versus other chains? I think maybe. I like to joke sometimes that with a ten-minute block time you could get MEV by hand. 8:56 Like someone could literally just- Yeah... you know, be like executing transactions in terminal, like typing in everything, and they don't need to, you know... No, no like C++ or Rust program necessary, right? But 9:09 I think end of the day, like the behavior actually will be rather similar because it's essentially a race to the bottom, right? 9:16 The moment competition arises, uh, you're fighting with everyone, uh, based on two things, like one is time, which may or may not be something that really matters here, and then also of course, um, with the value itself, like how much money in fees are you willing to throw at this, um, until you have spent more and thus are not making a profit on the MEV you're performing. 9:39 I think the latter here with the money and the value. Um, the smarter people at Rebar will talk about the grim trigger mechanism, 9:45 uh, which I believe is the game theory proponent of like when it's a race to the bottom and everyone wants to put more money in fees, eventually you run out of places to go, right? You run out of space. 9:56 There's no money left. Um, but that's deep game theory stuff. We should totally get Alex or Alyssa from our team on if you ever wanna talk about that insanely deep topic right there. 10:08 Um, but to that point my answer is the time is really interesting, but the moment there's any competition at all, it becomes about numbers. 10:18 So the way you even begin to compete for these off-chain traded assets- Mm-hmm... and Bitcoin's longer block time is you have to have pretty significant... 10:29 You have to have pretty good data awareness of what the value of those assets are- Yeah... and where they exist, and then have to have arbitrage strategies. But that is all downstream of data awareness. 10:41 To me, the best MEV begins at just procuring good, uh, digi- state of these digital assets that aren't on Bitcoin. Mm-hmm. Uh, but you guy... And, uh, could you talk to me about that? 10:56 I think you guys are working with Oil a bit on this. Yeah. Um, yeah, we're tied with Oil. I think 11:04 I can't really share too much about our data strategy simply because this is stuff we're looking to launch after our first product, which we'll also talk about in this call. 11:13 But you're right in that it feels like with all this new programmability on Bitcoin, you know, like the Liquidium token I mentioned earlier, um, yeah, I wouldn't know off the top of my head like what's an API I can ping to get a on-chain price, um, 11:29 right? And then back to the ten-minute mempool, like how that would influence that, I can't tell you off the top of my head, but I bet you it would have a difference there, right? 11:38 Prices would be slower, and that's where the ar- opportunity comes from. 11:41 Something that we're interested in developing is tools in this regard to get people better data, whether it's really fast data for searchers, for people running arbitrage opportunities, uh, or whether it's tools for people such as yourself to just observe these kinds of things happening on chain. 12:00 I think, you know, if you look at Ethereum, right, you can bust open Etherscan, and you immediately can dive in and see what's happening. 12:06 Bitcoin is, uh, very far from that, and I think we should ideally have a say and a place in changing that, um, without saying too much. 12:16 So-Yeah, we're very, very interested in exploring that and showing the data better for everyone. 12:23 Yeah, that's interesting because if you consider what constitutes a Bitcoin block explorer, it's, it's almost always just been limited to what is the current UTXO set look like and what is the tranja- transaction graph, what, what's in blocks. 12:37 But, you know, I, I wrote on this for a block space newsletter that the UI/UX for the Bitcoin ecosystem is being whipped forward a bit by the introduction of ordinals. I looked specifically like Ordyscan which- Mm-hmm... 12:52 has basically forked... Not forked, but just recreated mempool.space's like UI, but added some awareness and some color as far as to like what runes exist in this transaction. Mm-hmm. 13:03 I think this is really interesting because you can see directionally where this is headed. I wanna go back to BitFi or Bitcoin Fi and, 13:12 like, look at these new things which, by the time this comes out, there might be significant like iteration on the conversation. 13:19 But, um, you have these things which post data to Bitcoin and index that data off-chain w- according to their own rules. 13:29 I look at the Taptrack ecosystem, I look at Op Net, I look at other types of like data blob which turn those data blobs into smart contracts, and this is very interesting because I see MEV 13:44 written all over this from a power user or a transaction inclusion block, uh, standpoint. Um, did you anticipate that type of thing happening when, when Rebar, when you launched Rebar? And then, like, 14:02 d- you know, what, what are... what do you think this looks like? Do, do you think this... Do you think these things actually, uh, proliferate MEV or power user behavior on Bitcoin? I don't know. 14:16 What are your thoughts here? Yeah. Well, a bit about Rebar founding. Um, so I actually joined with these fellas two months ago, pretty much. 14:24 So I haven't been around since the very beginning, which I think was earlier this year, maybe February or so. And correct me if I'm wrong, didn't ordinal theory come about like early 2023? Like, really early 2023? Yeah. 14:36 That's, yeah, basically. Um- Launched in January. Yeah. So I know some, like the founders, like particularly our CTO, have been in the Bitcoin space for some time, 14:46 and I think they saw the opportunity here of, um, kind of like, you know, Apple could always foresee what someone would need before they really needed it. I think they're going for that same angle of, 14:58 okay, there's clearly like people wanna transact on Bitcoin and build this stuff on Bitcoin. Are we really early? Yes, absolutely. Um, but 15:06 I think it's good for us to get a head start and build this technology here because some of the stuff we're making, like Rebar Shield, talk about later, um, is necessary on any chain that has MEV occurring. 15:20 And like, what else was I thinking? 15:21 Um, secondly, I think a good reason that Rebar has started this so early is that you need to essentially pitch this to all the miners and mining pools of Bitcoin to have any of our products, uh, really work, right? 15:36 And judging what I'm talking about, I don't think it's something that they could have decided, like, they're gonna make in a month. Uh, this is... 15:42 We've been working behind the scenes, you know, ever since earlier this year. And to that effect, I think it's fine to say, yeah, maybe we're really early, slightly too early, but feeling very comfy about it. 15:55 Um, in terms of like MEV proliferating, I have like a very simple belief here, which is if there's value to be extracted, someone's gonna do it. 16:02 You're gonna have someone really smart, it can be from anywhere in the world across seven billion people on Earth, and I think one of those people will find a way to extract value from the stuff happening on Bitcoin. 16:12 It's only a matter of time. Yeah. Before we talk about Re- Rebar Shield, which I think is a wonderful product to launch with, uh, it's more of a vanilla like, uh- Mm... positive type of MEV product- [laughs]... 16:26 to, to put out there. But you mentioned like the landscape of pools, or I... really the producers of blocks, 16:34 um, being either the clients or they're, they're, they're key to being able to deliver MEV or MEV protection type products. Um, what are your thoughts there? 16:49 Like, I know there's a lot of people who have been trying to, like, work with mining pools and to try to- Mm-hmm... get various mining pools to, like, participate in some of these, 17:00 uh, strategies, but I don't think we've really seen very much, I would say, uncommon block production behavior. The only real example, I think, with that we've seen is Marathon with their Slipstream product, and they... 17:16 it just allows you to submit directly transactions which are not standard or not easily relayed to their mining node. Mm-hmm. But we haven't seen mining pools really embrace any active, 17:30 um, strategy for, uh, more sophisticated like MEV, uh, techniques. What are your thoughts there? Yeah. Do you think pools are open to this? And yeah, how do you, how do you think about this? Yeah. 17:45 Um, I mean, I think the Marathon stuff is cool. Call myself a non-standard transaction. But I still think it's early for the bigger mining pools to really embrace that. 17:58 Um, you know, as I said before, a lot of the MEV we have is simple arbitrage or sniping, um, you know, or spamming RBFs. 18:05 But it is very likely that as you build more cool stuff on Bitcoin, there does come a need for non-standard transactions, uh, we're gonna have, we're gonna have mining pools run that. So for me, that's kind of a TBD. 18:17 However-One reason why I'm generally bullish and confident that these pools would be into doing that more is simply the fact that block rewards continue to decrease, 18:28 and it generally looks like the trend is that block reward- block rewards will continue to decrease. 18:33 And if you have searchers who want to execute non-standard transactions and they'll pay higher fees or do something like a tip, you know, or an incentive for that, uh, mining pools can become really interested in that potentially. 18:44 Again, I can't speak for the mining pools, I'm just acting off conjecture here. 18:47 But even if we have enough volume happening on Bitcoin with these activities, we have enough searchers running transactions that would tip or pay a higher fee to these mining pools, um, that essentially becomes really, really appealing, I think, to those entities. 19:04 So if for the listener who's made it, say, 20 minutes into this and their heart is beating fast and they're scared because they look at- they look at you and they hear this term, you know, MEV, and they're just trying to trade their goddamn JPEGs, they get scared. 19:18 Mm-hmm. But this leads into, I think one of the... you know, the- the- the specific product that you guys are building right now, which is Rebar Shield. 19:28 I think this is more like the white knight approach to building out, uh, MEV tooling. Can you describe what this is? Uh, yeah. Can you describe, like, how this works? Yeah, absolutely. 19:40 Uh, I love your introduction there, by the way. Yeah, it's all gonna be okay. You know, your ordinals and runes and BRC-20s are gonna be just fine. 19:48 So Rebar Shield is our first product in Rebar Labs that we're releasing, and we probably will have announced it by the time this goes out, and we just have some final work in the background to finish before it goes live. 20:00 Uh, but the way it works is it's very similar to Flashbots Protect, but for Bitcoin, if the listener is not familiar with that product. The way it works is that 20:10 functionally, you submit a transaction on Bitcoin via an RPC endpoint, just like you normally would. 20:15 Um, and but that's forwarded to Rebar, to mining pools that are running the Rebar client, and they effectively-- that puts your transaction into a private mempool rather than the public mempool. 20:26 So we call it Shield because you're avoiding all these scary MEV things we just talked about by having your transaction sit in a private mining pool, 20:35 uh, sorry, a private mempool that's not rebroadcast across all of the mining pools. Uh, then from there it gets included into a block, and of course, it's public again. So when we say the word private, it's not like 20:46 Monero type stuff, but we're just skipping the transaction sitting in the public mempool for 10 full minutes. Yeah, this is just- Um Yeah, so a user can- Go ahead... 20:56 can pay a- a modest fee to basically guarantee that that transaction only goes to, uh, towards their original end, so it's not gonna get swapped out by someone else. Yeah, exactly. Um, yeah. 21:11 Yeah, it's hidden, hidden from the prying eyes of the searchers. And we've seen this, uh, with Flashbots on Ethereum, and it's incredibly popular. 21:18 You know, like even I have used their RPC if I'm kind of feeling a, a weird tingle in my spine about a Uniswap trade I'm about to do, um, because we all know like what MEV exists on Ethereum. 21:30 So I think this product is gonna be really vital, uh, as MEV emerges on Bitcoin. So what do... So this is- this is kind of like a... So it's like a p- protected private order flow product. Mm-hmm. Yeah. 21:43 Private order flow is another way you can put it, and that's exactly what it is. What... You know, what does this look like? Who do- who are the clients of this private order flow? 21:51 I know you mentioned, like intuitively I can understand maybe wallets, like an Xverse or Unisat saying, 21:58 "Click this little checkbox," you know, "Your- your- your transaction will get sniped," and underneath it's Rebar Labs all the way down. It, like, what is... 22:07 Uh, what is the-- What do you think this might look like for the end user? I mean, ideally it looks a lot like what you just said, 'cause that's what we imagine it to be like. 22:15 And we have been in talks with a lot of, you know, these major wallet providers for exactly that. Um, we want to get it perfect on the infrastructure side before that. 22:26 But essentially the value add is quite literally that. We even have a small little shield logo we're working on should they want to include that as well. Uh, so really easy, you know, for the users. 22:36 Um, kinda talking about different parties can be interested here too. Uh, we're interested in like how searchers would wanna use this as well, um, 22:44 'cause, you know, searchers like on Solana are using Gido, searchers on Ethereum like to use Flashbots, and we wanna be that same person for searchers. And also I'd like to- I'd like to just have a reminder here. 22:57 I'd like to talk about like why we're so interested in searchers and talk to you- Yeah, yeah... in a second. Um, so I wanna make it clear, we don't-- We have a philosophy here that's important. 23:05 Um, but we'll get to that later. But effectively, I think searchers will find our product valuable. Um, the last thing is that it would get especially interesting for them if bundles can be figured out on Bitcoin. Um, 23:20 we can also explain later, but- Can you explain to the- to the listener, like if someone has made it this far, they might know the me- Yeah... the mempool, they might know private mempool. 23:26 Can you explain transaction bundles? Yeah. Yeah, bundles are just submitting a number of transactions at once and essentially having a guarantee that these transactions all execute in a certain order. 23:37 And with Bitcoin it's tougher because on Bitcoin you can't quite order transactions as deterministically in a block. Uh, you can make your best effort at it, but 23:50 essentially like bundles aren't as valuable so far if, um, you can't deterministically order blocks so easily. I do have money bet personally in my head that will change. 24:01 Again, like for example, sandwich attacks, um, should be more familiar with sandwich attacks, function on the nature that you're able to exactly arrange transactions how you want to. 24:12 And the way Bitcoin works in arranging transactions, you have like parent-child transactions, fee, timing, and then like a bunch of randomness kind of thrown in there, right? 24:20 So-Sandwich transactions probably aren't really gonna be profitable in that paradigm because you have a certain percentage chance what's gonna happen there. 24:29 But the moment someone figures out how to actually order blocks how you want, bundles can become really intriguing for searchers, and that's something that you'd use Rebar's technology for. 24:38 You know, it's really interesting because right now all the rage over in Ethland is the modularity idea. Mm. 24:47 And we've split apart proposers and builders, and what you are describing [laughs] feels like Bitcoin's already had PBS, um, in, in its own way. We just haven't actually utilized it. 25:03 I heard, I think on the Gore Podcast, someone say that Bitcoin was modular before it was cool. [laughs] Um, what are your thoughts about this? 25:12 Do you see analogies between the proposer-builder separation and this type of, like, transaction flow that you're talking about on Bitcoin? Yeah. 25:21 I mean, I'd argue there already is a proposer-builder separation because you have some mining pools that are acting as template processors, and then some are just, you know, handing off the template creation processing to these larger pools, especially ones with smaller levels of hash rate. 25:39 I mean, so yeah, I'd argue it's already here. I think, um, Stratum V2 essentially made that possible and easy to do. 25:47 So you said you wanted to talk about your philosophy, and I think this is really important here because there's a bunch of different, like, views on MEV, 25:57 discrete types of MEV, MEV being good and bad, and then I think, was it- Mm-hmm... Kyle Samani's vie- view that a blockchain's value is the total value of MEV that can be ex- extracted from it. Mm-hmm. 26:09 Where does Rebar come from on this topic as a company building one of the first types of products in this space? Yeah, I mean, I think you've heard my tone on this so far. 26:21 It's, sort of, been a bit of a nihilist almost where I say, like, value extraction is inevitable. It's gonna happen. It's... it'll find a way. There could be someone in, like, Andorra who will figure it out- [laughs]... 26:36 and do it in their laptop. Get sandwiched by a Cambodian, yeah. Yeah, you know, um, anywhere in the world, right. And 26:44 essentially our, our philosophy here is that we wanna work with these kind of searchers, like these searcher teams, these folks finding out these strategies because we believe that, like, anyone can and will figure this out. 26:57 Anyone will support that to make it fair, and open, and transparent, and shared with the Bitcoin ecosystem so that everyone knows how to address it, rather than it being like a secret cabal thing that is happening, extracting values from users. 27:11 Like, worst case scenario would be that this is happening, extracting value from users, and no one knows how to even quantify it or research it or, you know, express data on it, which speaks to like... 27:21 That speaks to why we're really into the MEV protection product, d- data products we're working on to talk about this. 27:29 But lastly, like, we just wanna actually research this stuff and meet the searchers who are figuring out how Bitcoin works and what value can be extracted. 27:38 And our kind of thing that we give in return is tailoring some tools, you know, like, um, Rebar Shield, uh, to help them do whatever strategies they might wanna do, as long as we can agree to, like, have a fair ecosystem and not secret shadow-y people extracting all the value. 27:56 Um, so if you're a searcher listening to us, go on our website and click contact, top right, and say hi. You know, this gets in... This is interesting because a lot of what I've said since the beginning has been, um, 28:09 in the post-Ordinals world, I would say in Bitcoin season two, we, as Bitcoiners, can learn a lot from what's happened in the Ethereum and other crypto ecosystems. 28:20 And one of my questions, it's been a bit of an existential question, has been, well, as far as MEV in these other crypto economic ecos- ecosystems, like, we've discovered what doesn't work to mitigate it. 28:32 We've discovered a... Well, I don't know if we've discovered any, like, positives. We've just figured out how to play the cat and mouse game a little bit differently. 28:41 And maybe, and I'm speaking out loud, I'm just kinda speaking off the cuff here, maybe there is just all that we've learned is that the ecosystem growth is very path dependent. 28:54 Maybe what we've learned is that if we have, if we have foreknowledge about how the, the MEV games play out, we can direct them to end up in a more positive direction. Does this- Yep... resonate with you at all? 29:07 'Cause this seems to be a little bit like what you're describing. Yeah, definitely. Um, I mean, I think... Well, once again, I'll say MEV will happen, you know, nihilism, it's all gonna happen. 29:22 But sometimes it uncovers good things and, you know, teaches you how to make a network better and how to perform in adversity. 29:29 Like, I think one example is Ethereum used to do kind of random transaction ordering, um, in a block. And to get around that, you could do a lot of spamming. Like, same way you see with spamming to snipe Ordinals mints. 29:41 And spamming is bad. Spamming increases fees on the network. 29:45 So then Ethereum introduced transaction ordering by fees, which naturally it, it leads to another wormhole with MEV, but it's more transparent, and ultimately it's harming everyone on the network a bit less because there's less spam on the network. 29:58 So something like that says like... and MEV doesn't always have to be the worst thing in the world. It can reveal, like, something that would've happened anyways that was bad, and then steps can be taken to address it. 30:10 Um, I think what's also cool about MEV on Bitcoin, how new it is and everything, is you can-- we've seen, like, MEV play out on Ethereum for five, six years. 30:21 Like, ever since the Flashbots 2.0 paper by Flashbots and maybe a couple years before that. 30:26 And effectively we see all the game theory stuff play out, like all the fee wars and-You know, people getting down to the tiny last bits of value extracted. 30:35 And it's almost like a history book we can study as we build or maybe come into Bitcoin. Um, so I think that's really interesting, and just something to think about to that question. Yeah. 30:46 And it's interesting 'cause I look at, and I'm just using the most recent example of this on Solana, they solve their- Mm-hmm... 30:52 their DDoS issues or their, um, like, transaction spam issues by just introducing, um, a simple hierarchical user system. The more you got staked- Mm-hmm... the more valuable we- you are. You're a more meaningful user. 31:06 So- Yeah... I view that as like [chuckles] very much a, uh... That is a very clear design decision, uh, for that blockchain, which I don't think has really been appreciated by most of the end users. Um- Yeah. 31:21 Um, I've definitely been appreciating it, 'cause the, the transaction will actually happen now, which is awesome. Yeah. And yeah, I mean, for a while there on Solana, people like... 31:29 You know, look at a Python or node script, and it would just be like a, like a loop to fire off a transaction over and over again, you know, until it gets picked up. 31:38 And I think that's one reason why, like, Solana, I think, is powerful, is it's gone through, like, so much pain, you know, and had to, like, deal with so many issues, that they've figured out a lot of solutions as a result. 31:50 So, you know, back to MEV, I'm kinda like, sometimes being a great network involves a little pain along the way. That's okay. I'm a... 32:01 You know, I share a bit of your in- you know, nihilism that it's inevitable, but it's also- [laughs]... that I also kind of like... 32:09 I mean, I've been to Bitcoin a long time, and, um, my view on price is people always ask me, like, what the price is gonna be. I'm like, "Well, 32:16 I think Bitcoin will be a million, $10 million some- someday, but it's going to take the most painful path imaginable- Mm... to get there." And empirically, that has been the case. Yep. S- so, um, 32:32 one thing that I see, and it's a trend, 'cause I, I check in on the discussion on ETH consensus and where does ETH go from here. It feels there's a, a bit of disillusionment in the ecosystem right now. 32:46 I, as a Bitcoiner, can relate to this a lot, um, given our history. Um, but I've seen some of, like, the really, really sharp people s- uh, who have... 32:55 who are on the absolute tip of the spear of how do you, how do you create a, a comparatively fair blockchain talk about how... Maybe even, like, reflect publicly that 33:08 proof of work may actually be a very important component to building a fair and open system, which makes me... 33:16 You know, I, I, I look at how Bitcoin's currently pretty unexpressive design works and the way that proof of work backends the probabilistic nature of block production. This is a pretty big question. 33:29 Feel free to take it anywhere you want. Do you think proof of work and Bitcoin's natural design makes it more resistant to toxic MEV over the existing proof of stake systems out there? Mm. No. 33:46 I think, I think, like, proof of work, proof of stake, whatever, um, it's all abstracted away from mechanisms of decentralized finance. You know, like, you're gonna have the same incentive structures. 33:57 Like, if you look at Ethereum, it kinda looks like the same game is going on over there, whether it's proof of work or proof of stake. Um, maybe there's smaller details below this, and I'll just admit i- ignorance there. 34:10 Uh, but from a high level, I kinda still see, like, the same concepts playing out no matter what's going on underneath. I appreciate that answer. That's a really interesting answer. 34:21 Um, I try not to be blinded by, by my own proof of work maximalism, but, uh, yeah, this is a really interesting discussion. So do you think, um, do you think someone who... 34:36 Do you think the existing searcher class, primarily on ETH, do you think that they're well-positioned to excel on Bitcoin? Or do you think that the future of Bitcoin MEV searchers requires a different skill set? 34:52 I think they're probably excelled, uh, for Bitcoin, especially once there's, like, enough volume to make it worth it for whatever size team they are. 35:00 Like, even I can see, like, small teams or solo operations probably doing things right now, I would guess. 35:06 I've also talked to a couple teams already who are, you know, established teams that, I don't wanna name names, but are probably known to people, and are certainly interested in keeping an eye on this. 35:15 You can honestly even argue that they might be, fare better off because there'll be less competition on Bitcoin. 35:21 Um, imagine, like, bringing someone on board who really understands how the chain works and the UTXO model and everything. 35:28 But beyond that, I just think less competition will make it night and day compared to Ethereum, um, which has been, you know, I'm trying to think of a good word here. Um, 35:40 the MEV environment, it kind of probably looks like my local supermarket in March 2020. [laughs] All the toilet paper's gone, you know? Yeah. [laughs] That's a really good analogy. Mm-hmm. Um, 35:54 just some other, like, non, you know, non-sequitur topics. Like, you know, when I look at, um... I'm not familiar with, like, the capital requirements for, um, MEV, uh, for ETH searchers. Like, in order to conduct... 36:09 I see, like, I see, like, a tweet from, like, of that, like, Jared from Subway spent, like, $100 million to get, like, $50 in, in margin. That is a huge capital requirement. 36:23 Maybe there's some flash loans under the hood that I'm not aware of or something, but, like, you know, this requires, this can require deep pockets to, like, arbitrage these off-chain assets with-... 36:36 the on-chain behavior. Do you, is this, is this a meta or a per, an important ingredient, do you think for- Yeah... pools? 36:44 Yeah, I mean, first of all, like if transactions like the jerk from Subway one, um, I feel like definitely a flash loan involved there, and I know I was asking some folks in Nashville if protocols are kind of dipping into the Abe area. 36:58 I'm like, "Do you ever do flash loans, if you could?" Kind of thing. 37:02 Um, but going back to bundles, it'd be really helpful to have bundles where you obviously wanna be able to arrange your transactions in a certain guaranteed order, um, lest your flash loan be not so flashy in that case. 37:15 Um, so that's, to that effect, I think people are definitely probably working on that very situation right now. 37:22 Um, in terms of capital requirements for not using flash loans, I mean, I've always kind of seen like a sliding scale for these on-chain, uh, things. We have like, 37:33 you have some strategies that don't scale well and you can do with... You can make like a higher percentage return, but scales less well, so you can use not so much capital. 37:42 And then there's things that scale really well, but give a lower percent return that's for like the people with, you know, millions, tens of millions, hundreds of millions of dollars. 37:50 Um, this effect with Bitcoin, I think it's gonna ultimately just end up like your typical trading shop strategies. Um, 38:00 I think again, it's all abstracted away to a certain point, but some tools need to be built for it to be possible on Bitcoin, like the bundles, to really take advantage of it. So 38:11 it feels to me that, again, the big barrier here is just getting, um, a pool to cooperate. Like, that's kind of the holy grail. 38:20 [laughs] So until a slip stream, either at Mara or at another pool, another type of private mempool of these pools 38:29 comes out, that is probably, like the ecosystem pretty much looks like just kind of power users, uh, extracting ordinals sniping mids. Do you... And feel free not to answer here. Do you think this will happen in 2024? 38:44 Do you think we'll see direct pool partnerships this year? Hmm. I'm gonna say, uh, don't hold me to this because the only, the one thing I'll say about pools is, you know, they're, they're careful, right? 38:55 Like in our discussions with all of them, you know, they move a bit slow and I think for a very good reason. They shouldn't listen to any willy-nilly company that says, "We're gonna change their lives," right? 39:07 Um, that being said, if you're just talking about like vibes alone, and, you know, don't hold me to this because I'm not even speaking on Rebar's behalf here, I'm just saying my personal vibes- Yeah... 39:18 the answer would be yes. Spicy. I mean, I... It's funny 'cause like I thought [laughs] I worked for a pool over the past year. I thought, uh, for sure. Yeah. Of course. Obvious. 39:28 There's the, there's a giant carrot dangling and, um, for a number of reasons I've seen there's not a va- a lot of actual execution on this. Um- Yeah. Well, also it doesn't have to be... 39:40 I'm not really saying yes to something that's like they're making block templates or they're, God forbid, rearranging transactions or something like that. 39:48 I'm saying something as simple as like accepting a transaction from a private mempool. Yeah. You know, um, really simple and like not really them doing anything else than that. 39:58 So I wanna make it clear when I say yes, it's not like changing the fabric of the mining pool or how Bitcoin works. 40:07 Um, the only thing like Rebar really focused on right now is the mempool and offering a private order flow solution for that. 40:15 You know, the other thing that I think is probably very different, which is structurally different about Bitcoin, is the way that templates are passed back and forth between the pools and the actual machines mining with the pools. 40:27 Mm-hmm. This is an interesting area, and I'm not sure how many people have thought about the implications on private mempools because 40:35 are you familiar at all with spy mining, where you point your ASICs, your rigs, to a competitive mining pool and you get to see what templates they're passing you? 40:49 This is a way to circumvent the privacy of that mempool in that they would have to, uh... 40:59 You know, this, this introduces another vector, which I, which I think is very fascinating into the, uh, private mempool games, but this has to be executed by the actual data center operator themselves. Right. 41:11 And the data center operators, in my experience, are at, on the absolute least sophisticated, uh, and on the totem pole of sophistication, least sophisticated about like the mev games. So, um, 41:25 I don't know, is this a new concept or have you thought about this? I'm just, this is a total curve ball that I'm throwing at you. No. Actually, I saw like an article on this shared in our Slack. 41:35 Um, I mean, I, I gave it like a read over, but I, I was like busy with something, so I didn't quite reach deep into it. Um, but thank you for that nice and succinct explanation because that is crazy. Um, 41:49 I can't comment on it personally, but like we do keep an eye on stuff like that. Um, so I'll definitely be looking into it. You know? Yeah. 41:57 I might honestly even like poke some of my colleagues, the smarter ones than me, and ask them for their opinion on it. So you got my curiosity piqued as well. Yeah. 42:06 What, uh, what talks have we not covered that you think would be interesting for this conversation, given that, you know, like I feel like we could have this type of conversation every three months for the next- Yeah... 42:17 two years, and each one would look very, very different. Um, what topics- Oh, definitely... do you think would be interesting to like have summer of 2024, August, interesting to have on the record? Yeah. I mean, 42:31 I think like, I, I think, I think there's a very solid chance that whatever meta protocol, let's say-Programmability on Bitcoin is a huge thing in 2026. 42:39 I think there's a solid chance that whatever meta protocol, like BRC-20 of Bitcoin, BRC-721 of Bitcoin, right? I think there's a very solid chance that that doesn't even exist yet. 42:49 It could come out, like, early next year. Like, I think we're so early and in such a Wild West that we could absolutely do this, like, you know, every three or four months, you just check in and see what we've learned. 43:01 Like, even, like, things like Offnet right now are kind of popping up and doing stuff. Um, like, yeah, that, I think 43:10 things are gonna change very quickly, and that's why I like so much what I'm kind of saying is, like, it's a dark swamp. The swamp is dark, humid, things are changing. 43:20 I'm seeing, like, pairs of glowing eyes in the undergrowth, and it's awesome. That's something that really drew me to, like, Bitcoin was there's a lot of cool stuff happening, and it's kind of like a Wild West vibe. 43:33 You know, people are figuring things out. It's a blue ocean, and it's a swamp, and it's a dark forest. It's all of those things at the same time. Mm-hmm. Uh- I think that exists in Louisiana or- [laughs] Yeah... 43:46 Mississippi somewhere, all three of those things at once. Exactly. It's, yeah, swamp, swampy Bitcoin. Um- Yeah... Devin, I really appreciate, uh, hopping on here and talking through this with me. 43:57 I think this is the type of thing where I just wanna have one of the first... 44:00 I wanna have the first conversations on these topics until they get too high level, and too specific, and too difficult for me, too arcane to understand. Then I'll just hand off the baton to a much more- Mm-hmm... 44:13 uh, technical quant-type podcast interviewer. But thank you so much for your time today, and I look forward to keeping in touch with what Rebar is doing, and perhaps 44:22 someday sending my own Ordinals purchases through Rebar Field. [laughs] That'd be wonderful. Yeah, and thank you so much for having me on. You know, this was fun. 44:32 It was great to talk about what we're doing, and I'm very excited to, you know, keep reporting on what we see go down on Bitcoin. Cool. Talk to you later. All right. Bye. Thank you. 44:43 [upbeat music]
