Demystifying Flashbots: Protect Your Ethereum Transactions and Leverage MEV (Maximum Extractable Value)

Introduction

In the ever-evolving realm of Ethereum, miners (now validators) wield a certain degree of influence over transaction inclusion within blocks. This influence can be harnessed to extract additional value, often at the expense of regular users. This phenomenon is known as Maximum Extractable Value (MEV). Flashbots emerges as a solution, aiming to mitigate MEV's impact and empower users with greater control over their transactions.

What is Flashbots?

Flashbots is a research and development organization working on mitigating the negative externalities of Maximal Extractable Value (MEV) and avoiding the existential risks MEV could cause to stateful blockchains like Ethereum. Our primary focus is to enable a permissionless, transparent, and sustainable ecosystem for MEV, via a three-pronged approach:

• Illuminate: Bringing transparency to MEV activity.

• Democratize: Democratizing access to MEV revenue.

• Distribute: Enabling sustainable distribution of MEV revenue.

Benefits of Using Flashbots

Enhanced Transaction Speed: Flashbots transactions often secure inclusion swifter than those languishing in the public mempool, expediting confirmations.

MEV Protection: By circumventing the public mempool, Flashbots shields your transactions from MEV bots that might attempt to manipulate them for personal gain.

Flexibility: Flashbots empowers users to specify a maximum MEV share they're willing to concede to block builders, ensuring transparency.

Who Should Consider Flashbots?

While Flashbots offers advantages, it caters primarily to specific user groups:

• DeFi Traders: Flashbots safeguards against front-running, a prevalent MEV tactic particularly detrimental in DeFi environments.

• Arbitrageurs: Flashbots can expedite arbitrage opportunities by ensuring timely transaction execution.

• DApp Developers: DApps can integrate Flashbots to offer users MEV protection and potentially faster transactions.

Using Flashbots Protect in Javascript

Prerequisites:

• Node.js and npm (or yarn) installed

• A basic understanding of JavaScript and Ethereum concepts

Step by step:

1. Project Setup:

   • Create a new project directory: mkdir flashbot-example

   • Navigate to the directory: cd flashbot-example

   • Initialize a Node.js project: npm init -y (or yarn init -y)

2. Install Dependencies:

   • Install the ethers.js library for transaction creation: npm install ethers.js (or yarn add ethers.js)

   • Install the @flashbots/ethers-provider-bundle library for interacting with Flashbots: npm install @flashbots/ethers-provider-bundle (or yarn add @flashbots/ethers-provider-bundle)

3. Create a JavaScript File:

   • Create a file named flashbot-protect.js in your project directory.

4. Import Libraries

   const ethers = require("ethers.js");const { FlashbotsBundleProvider,} = require("@flashbots/ethers-provider-bundle");

5. Define Transaction Details:

   // Standard json rpc provider directly from ethers.js. You can use Infura, Alchemy, or your own node.
   const provider = new ethers.providers.JsonRpcProvider({
     url: ETHEREUM_RPC_URL,
   });
   
   // `authSigner` is an Ethereum private key that does NOT store funds and is NOT your bot's primary key.
   // This is an identifying key for signing payloads to establish reputation and whitelisting
   const authSigner = new ethers.Wallet(
     "0x0000000000000000000000000000000000000000000000000000000000000000"
   );
   
   // Flashbots provider requires passing in a standard provider and an auth signer
   const flashbotsProvider = await FlashbotsBundleProvider.create(
     provider,
     authSigner
   );

6. Create transaction:

   const transaction = {
     from: signer.address,
     to: signer.address,
     value: "0x42",
     gasPrice: BigNumber.from(99).mul(1e9),
     gasLimit: BigNumber.from(21000),
   };

7. Send transaction:

   const res = await flashbotsProvider.sendPrivateTransaction(
     {
       transaction,
       signer,
     },
     {
       maxBlockNumber: (await provider.getBlockNumber()) + 5, // only allow tx to be included for the next 5 blocks
     },
   );

8. Checking status sent transaction:

   const waitRes = await res.wait();
   if (waitRes === FlashbotsTransactionResolution.TransactionIncluded) {
     console.log("Private transaction successfully included on-chain.");
   } else if (waitRes === FlashbotsTransactionResolution.TransactionDropped) {
     console.log(
       "Private transaction was not included in a block and has been removed from the system.",
     );
   }

More documentations: https://docs.flashbots.net/flashbots-protect

Conclusion

In conclusion, Flashbots represent a transformative advancement in Ethereum transaction processing, offering enhanced privacy, efficiency, and security. By bypassing the public mempool and facilitating direct interaction with miners, Flashbots enable users to execute transactions with unprecedented speed and privacy, revolutionizing the way we engage with decentralized applications. As the Ethereum ecosystem continues to evolve, Flashbots will play a pivotal role in shaping the future of blockchain technology, empowering users and developers alike to unlock new possibilities in decentralized finance, digital ownership, and beyond.