This article is by no means comprehensive and is comprised of my own views and thoughts.

None of it is financial advice even if it sounds like financial advice.

Also for the sake of time and understanding of the following discussion, I am assuming you have read my previous piece on the block building space or one of the other many great overviews out there.

I tried to avoid projects that don’t have a token for this write-up. I do mention a lot, particularly at the end, so should be a good opportunity to explore further or build a watchlist. I decided on a commentary then some TA format for this one, with my own tho(ugh)ts to conclude.

As I will always do: if I have exposure to any of these tokens, it is disclosed.

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1.) FOLD

I had the blessing of running some LUNA up from around $2 in the beginning. I listened to countless podcasts with Do Kwon pitching the LUNA-UST-ANC vision to hosts with only a few thousand subscribers, and rehashing the same concepts over and over again.

I remember having the thought at one point while listening to one of these while LUNA was ranging around $50: “Man, I’d get a little annoyed too if people hadn’t even taken the time to read the docs before sitting down with Do.”

Serendipitously, I was fortunate enough to actually read the docs for both Terra and Anchor Protocol to see the cracks in the design--along with some very helpful prodding from frens<3--around the end of 2021.

I was able to make it away unscathed. Definitely up a good chunk, but ruthlessly balanced out by my other degenerate proclivities. But I am very luck I promised myself I wouldn’t hop back in, no matter how enticing the LFG BTC backstop and $1000 price Twitter price targets were to me.

In addition to some good conversations I’d been having at that point that made me cautious about Anchor mechanics, the mood on CT regarding Do Kwon’s attitude was reaching unmatched froth levels.

Anchor TVL was being measured in the tens of billions, UST was spreading across the multi-chain, and LUNA had permanently cracked the top 10 coins by market cap. As much as I didn’t agree with Do’s attitude bc I’m just not built like that, I could at least see how he could be frustrated with critics at some intersections. In many ways, Terra had already won. The salt was palpable.

But the markets have a way of humbling even the largest of players.

When you speculate, you swim in shark-infested waters. Painting a red target on your back is never a good idea. And whether it was always going to happen or the stars aligned in just the right way for it to be possible, UST collapsed; Do went from hero to zero; 3AC went insolvent; and we are still wobbling from the the second/ third order effects today.

To date, crypto has had more than its fill of egotistical type-A characters/villains--Do, Dani, Andre, Tetra, Justin Sun, Roger Ver, Craig Wright--these are literally just the very top of the barrel and I’d bet reading each one is probably enough to illicit some emotional response in you anon, if you’ve been here any amount of time.

Thus, whenever I encounter founders or players with traits reminiscent of the cast above, the knee-jerk reaction is: “uhhh EW.”

So before immediately jumping to conclusions, I wanted to give myself enough time in between writings to fully digest the situation with Manifold, and gathered enough empirical evidence to make sure I wasn’t just making shit up in my head.

Now that is done, I can confidently say: “uhhhh EW.”

There simply just is no need.

Many know Sam Bacha is a past contributor to YFI, but many people (I am guessing) have never taken the time to read The Blue Pill. It’s definitely one of the coolest productions in the cannon of crypto literature (I think). It serves as a historical document of Yearn’s founding ethos and principles. It’s pretty cypherpunk, but also a lot of Andre-worshipping (yuck).

I think it’s important to consider this document in parallel with the ethos that Manifold seeks to embody. The ‘Guiding Principles and Dogma’ section is pretty much the only part of Manifold’s documentation that is completed outside the technical parts, which in itself sends a pretty clear message (ironic) about what the team cares and is focused on:

So if token holders are doing their homework, we can’t necessarily expect much here.

That being said, from my own perspective: Sam is consistently non-helpful in his engagement with community members and individuals with legitimate questions in regards to the protocol. I have found him to be a poor communicator, constantly using unnecessarily complex locution and pointing people to spaces he claims there are answers where there is none.

Idk what legal tax entity Sam is in charge of, but my guess is they would prefer it if he just got a personal Twitter account vs. doing everything under the Manifold name.

And you know what I could cut this up a thousand ways and threadooor this shit until I’m blue in the face (pun intended) but the truth is:

-- The non-technical docs remain almost entirely unfinished and any comment/ questions on this is becoming almost taboo in their social channels, of which are scattered and mostly just people asking questions repeatedly that could be answered via documentation

--Their Balancer partnership fell through and maybe same with LayerZero referencing this little graph from the community call just shows Sushi and OlympusDAO (if you want more examples of circumlocution to nowhere and unanswered questions definitely read):

--No one has any idea what kind of revenue to expect from Sushi, and SushiSwap as a DEX is currently hitting all time lows on the social optics scale + probably some of the worst slippage and rates out there 1inch and Uniswap are legit always cheaper (in my experience)

--There is no clear posting of tokenomics or even a blog post going over how their new staking in ‘v2’ is going to work and if you ask about it Sam tells you all the info is there when it’s not. Meanwhile people staking FOLD rn are being mislead thinking they are currently in the process of getting staking returns when they are not -- for anyone who has staked over the past month I am almost positive you will not see a dime in returns from being staked.

One of the best things Manifold has going for it is that it’s not censoring blocks but now more light is coming to mind on what kind of censorship is even happening.

If the goal is to capture exclusive order flow though you are going to need to be able to forge partnerships with other people and keep healthy relationships. In fact -- if you want anyone to use any of your products you will have to do this.

I don’t know if I can say it better than Meltem does right here. As a founder or CEO, communicating your vision to others is paramount; especially in crypto where transparency is upped x100 when anons and team members are rubbing elbows in Discord and Telegram trenches.

So while Manifold’s Twitter calls us all dumb-dumbs in the comments like they already ran a protocol up from 0 to $10bil to 0 again (current FOLD mc = $61 mil $34mil at the time of this writing), the real LARP is anyone who can’t find a way to be decent to everyone they communicate with, regardless of intellect or any other previous identifier. Full stop.

*^oh yeah you know I’m dropping a Naval tweet fam^*

From a trading perspective:

FOLD is still is one of the most puntable and well-positioned (if they can deliver) projects in a small universe of tickers to speculate on, to play this MEV narrative.

The MEVboost data we do have is incomplete and how it is being collected is not fully understood. This might work in FOLD’s favor for the moment as Sam is always saying they are farther ahead in the race and that MEVboost is not accurate.

But again, there’s currently no staking rewards being distributed and no clarity on what those rewards will look like which is (from what I can tell) the purpose of FOLD--to act as a marker representing future MEV flows.

It’s a shame though bc FOLD could be such unicorn play if it was what it seems to be on the surface and morale was high, but selling bad vibes in a bear market is legit the worst marketing strategy ever.

Anyone with the brain the size of a peanut can come to that conclusion. Doesn’t matter how practical your protocol is, it doesn’t = token go up.

And of course the “DAO”. How a DAO is going to spring up magically with this communication style is beyond me.

But there will of course be opportunities as things shake out. And as more data comes together, could be that the profit Manifold is generating for token holders outweighs anything. Again, these are all just my opinions from the outside looking in.

Either way, chart looks cooked short term though. Maybe that’s what Sam meant by referencing recapitulation theory? (Michael Scott voice: boom roasted)

2. EDEN

Eden Network had its moment back in the peak of NFT season when people realized they could use the Eden relay to circumvent the bidding wars during mints. At least that’s how it originally came onto my plate. Sitting at just about $10mil mc/fdv I think during any significant MEV musical chairs it has a good chance at getting sent/ acting higher beta to the “leader” FOLD rn. White paper here.

Eden Network’s focus is really on redistributing value back to its stakeholders. They have a MEV protection RPC that anyone can connect to (order flow) and appear to have a dedicated cohort of block producers.

The EDEN token is not trying to be a synthetic form of MEV revenue like FOLD appears aiming to be. When you stake EDEN tokens, you can increase your priority in their private mempool and thus, get your transaction processed faster to increase your chances of capitalizing on an exploitable opportunity if you are a searcher. Staking EDEN is to gain a latency edge, and in this way EDEN is more a synthetic for blockspace.

Eden Network is also seeking to distinguish itself from other middleware solutions by creating liquid staking products alongside its incentive model. Currently, it is only providing this service for Avalanche (yyAVAX), but this makes it at least seem possible they could expand to mainnet and grow their network to other EVMs as well.

Overall, Eden team seems like a chipper communicative bunch that has been able to keep a dedicated group of users by focusing on making an altruistic environment for traders, searchers, and validators.

Again, if we get some sort of MEV rotation narrative, I think the fact it’s a low mc coin in a small selection of tickers means it would get punted in the right environment/ easy multiples. Also, finding a way to direct some MEV revenue back to EDEN stakers would be an easy switch down the road. For right now though, their searcher-oriented service definitely appears to have a PMF.

3. RPL

Rocket Pool is a second-order MEV play in the form of a Staking-as-a-Service (SaaS) provider for Ethereum (similar to LiDo), but with the aim of creating a more decentralized validator network for ETH. Through their staking pool, Rocket Pool enables users to solo-validate with only 16 ETH instead of 32 to form what they call a minipool.

Likewise, unlike LiDo’s stETH, rETH holders can redeem their rETH back for ETH + staking yield at anytime as long as there is liquidity in their deposit pool. This is pretty banging and a big value add for rETH holders, even though liquidity and parity for these liquid staking derivatives will likely only increase into the future.

The RPL token also seeks to further incentivize the integrity of rETH by requiring validators to stake a small amount of RPL alongside their ETH in case poor validator performance incurs slashing penalties.

The Protocol DAO is in charge of the RPL parameters and dynamics, including inflation rate which means perpetual RPL rewards on top of ETH yield=noice. In addition, there is a second DAO within Rocket Pool that is also incentivized with RPL called the ‘Oracle Node DAO’ that performs specific tasks to smooth protocol operations, which also helps keep rETH quality up.

By lowering the bar for normal users to validate--and because these validators can sell blockspace to any builder they want--SaaS providers like Rocket Pool make the builder market become more competitive as smaller players have a bigger say in where they shop. Liquid staking derivatives for ETH are going to be/ are already the norm. They will also have a huge impact in the way ETH is perceived and scaled.

4. ROOK/ COW

These projects seek to capture MEV at the app layer and I think offer a unique solution to traders when confronted with the MEV dilemma vs. other middleware solutions.

Rook was shilled pretty heavily during the bull by a few big CT accounts only for the floor to fall out and has been out of favor since. In many ways, I think it was just ahead of its time. Now that ETH 2.0 is here, it offers a much more interesting opportunity for those looking to play the MEV narrative.

Rook’s swap allows users to tap on and off chain liquidity via its Keeper network which bids in ROOK on bundles of transactions in its own auction market. Keepers are basically the block builders in this scenario bidding for the exclusive order flow. Traders get to interact with mainnet like they would a traditional order book with zero-gas and zero-fees. In turn, 80% of MEV captured from this order flow is routed back to users in ROOK.

From a pure tokenomics standpoint, I think ROOK is the best out of all the tokens I’ll mention here bc it is done with emissions (total supply 1,268,373) and thus, due to a small portion (4%) of ROOK being burned in each Keeper auction, deflationary. Re-compensated traders can stake their ROOK for xROOK to earn a share (10%) of the total MEV captured from the protocol.

Since Keepers bid for batches in ROOK and some returns get recycled back to traders, I think ROOK offers a nice balance between what EDEN and FOLD offer individually. Currently, about 13.5% of circulating ROOK supply is being staked with about a $33m market cap, which is now about the same as FOLD, tells me market sees this too even if chart is destroyed. Plus Protocol-Owned-Liquidity (POL) adds another stabilizing aspect.

Also this:

What’s very interesting to me is that Rook also has it’s own transaction relay that can be integrated into wallets and other applications, which means they are also capturing some (albeit probably very small at the moment) order flow from outside the app and building their own blocks in some capacity!

CoW Protocol (built by Gnosis) is unique in that it aims to conduct swaps peer-to-peer (Coincidence-of-Wants) when possible. Users who trade on CoW Swap experience MEV protection as order flow is routed to it’s group of solvers who batch transactions off-chain, allowing for a user-friendly set of features like paying for gas in the sell token, and the ability to send many orders at once.

In this way, CoW Protocol is a self-proclaimed ‘Meta-DEX Aggregator’ bc you are not swapping through CoW Protocol itself but rather signing the right to swap token A for token B which is then handled by it’s solvers.

Solvers serve a very similar role to Keepers in for Rook in that they bid for order flow in a specialized market. However, where Keepers must bid for an all-or-nothing batch, it appears to me solvers in CoW Protocol may be able to capture more specific order flow. Also the auctions do not resolve in COW (afaik).

In terms of tokenomics, I could not find much on way of COW except some info in this random thread:

To that end though, I still think COW is relatively undervalued under $10m mc when stacked up against other DEX aggregators like 1inch $350m-ish. Even with 90% of token emissions still to take place, the fact it is capturing 11.5% of DEX aggregator volume is telling.

However, until more clarity and details become clear surrounding emissions and token utility, or they capture significantly more volume, it will likely remain that way. Any future changes that would direct MEV to COW holders in anyway would be a big catalyst.

Sigh, if only Rook.fi had the trading volume CoW Protocol has, and if only COW was structured more like ROOK.

5.LIQD

Liquid Finance is the definition of a flier MEV bet, bolstered by the fact you can farm it for high APY rn, lives on Arbitrum, and is still a v small market cap (2.2m). There are two farms, their ETH-LIQD pool (584%) and lqETH-ETH pool (85%) and LIQD rewards are locked (by the week) and vested over 8 weeks unless users want to cash out early and pay a 50% penalty to access their staking rewards right away.

The protocol is built around what they call their Liquid Arbitrage Mechanism which is a bit of a mind fuck at first but is actually quite brilliant the more the idea marinates.

Pretty simply, lqETH supply is controlled by the team allowing them to capture arbitrage profits from the lqETH-ETH pool whenever lqETH is not 1:1 pegged to ETH.

This is essentially how many stablecoins end up keeping their peg, and more like LUNA-UST dynamic, except these trades will only execute if the reserve ends up with more ETH than when it started which is the key/ MEV part.

The team basically decided to front run every searcher and turn the profits into POL. Noice.

They are distributing these fees back to solo LIQD stakers along with the LIQD penalty fees from people cashing in their LP rewards early to the tune of about 112% rn.

For the moment, we are at a small enough scale that the boat can’t get rocked too hard, but at larger scales the piece of pie to mess with the peg somehow will probably become evident to a party with pockets deep enough to do it.

This is just my personal opinion and I have no idea how it’ll happen. It’s just the nature of experimentation in this space.

Still: I am really jazzed about someone directly making a token that represents MEV profits and the team seems really straightforward with some more strategies up their sleeves.

Notably, a lqETH-stablecoin pair is coming, and from Discord murmurings: a *potential* team up with Y2k Finance so that in the event of what I mentioned above, the team can actually make sure the downside on lqETH de-peg event is minimized almost entirely. NEAT. I hope we see this idea implemented and experimented on further.

The real kicker for this will be getting lqETH integrated elsewhere. It’ll be a complex game of strings then between the lqETH bonds they offer, keeping the lqETH peg on their pool, and capturing arbitrage. Idk what’ll happen, but it’s pretty fun at the moment.

*Disclaimer: I own a very small amount of LIQD I am downbad on🫡

my smol thots:

I still believe Uniswap will get into the business of block building at some point in 2023 which would create a nice vertical stack for the traders and token holders. In this respect, if any news surrounding that comes about, it would make UNI an easy buy-and-hold for me bc of how much order flow they already capture.

Similar for 1inch as a DEX aggregator doing anything like CoW Protocol, or any big DEX for that matter. Basically, tapping a fountain of instant real yield from their current order flow. SushiSwap partnered with Manifold Finance to do just this but first horse out the gate ain’t always the winner.

Obviously too: LINK becomes even more attractive if their Fair Sequencing Service is modified or adopted at any point. That, plus their staking structure makes it an easy perpetual call option to hold. Maybe that makes too much sense for this market though honestly.

I’m not a LINK marine either, so I don’t know everything else in the works but my guess is that it would be one of the last coins to pump whenever the rotation comes; or one of the only ones to be pumping (true-to-form). But the deep liquidity and institutional friendliness make it likely we see $100b FDV at some point right?

There is no question how PBS shapes up and MEV gets tackled will play in greatly to the decentralization of ETH. But the more I dig, the more I realize there is A LOT being done to combat the negative consequences of malicious MEV.

For instance, just take into consideration the amount of privacy preserving protocols on ETH that would remove most MEV out of the equation. Projects like Railgun and Silent Protocol that allow users to interact with DeFi anonymously will significantly reduce the amount of MEV available. Likewise we must consider the implications of private wallets, such as Nucleo, and privacy-focused roll-ups like Aztec.

Moreover, as I mentioned with Rook running an app interface and a transaction relay for other projects to connect to, other players will start building their own blocks. Just recently, we saw builder0x69 make their debut, and some indications that Huobi was potentially building as well.

Right now, Flashbots, bloxRoute, Blocknative are all token-less. But how out of the ordinary would it be for any of these organizations to introduce one into play?

New unidentified builders are on the scene and I am guessing we will find some large backing behind at least one of them in the coming months and/ or at least one of them will spread the wealth around in the form of a token (eats popcorn).

I purposefully excluded Automata from this bc they are focused on BSC, but other players from other EVMs can also enter the mainnet game at any point. Tackling malicious MEV is not confined to EVMs either: Cosmos based projects like Skip Protocol and FairBlock are also trying to enhance UX for ATOM.

We’re already seeing threshold-encryption as a solution via protocols like Shutter Network and others will likely continue to pop up. Shutter is cool because no changes have to be made the underlying EL or CL for Ethereum.

In like manner: do not sleep on the folks at Alkimiya or anyone else trying to build capital markets around blockspace. Renting hashpower and hedging through spot futures for BTC miners has existed pretty much as long as ASICs have been on the scene, but creating deep liquidity for ETH blockspace derivatives/ products will be a big undercurrent of how large treasuries and players manage risk in the future.

I am really really looking forward to whoever pulls together a token that represents just pure MEV flows from Ethereum-based order flow. The primitives and derivative markets that pop up around this will be very very cool.

Furthermore, projects like Gravity Protocol that aim to increase ETH staking democratization by creating lending markets for the many liquid staking products available will mean builders will have to be good at marketing too as more validators come online.

Side note: I can see this sort of dynamic on ETH will likely add a lot of gas to the fire at some point as people borrow against their stETH to pop up more validators. This is simply the way.

Subsequently, the chads over at EigenLayer are further solidifying the vision of ETH as a security layer for much of crypto by enabling ETH to be re-staked to support other projects vs. them needing to set up their own security and trust network.

Essentially a robust middleware solution aimed at supercharging Ethereum, EigenLayer is not really anything new in theory*** as there have been iterations of projects piggybacking of BTC’s trust layer in many forms over the years (KMD, I think DCR, just very top of my brain).

But doing this with ETH 2.0 brings about new second and third order effects in a novel manner via a specialized smart contract. Their EigenDA which is live and very new in concept, creates a data availability layer for Ethereum is really important to the big picture in terms of scaling.

Modularity will be the new buzzword. And MEV will def become more scarce in a TE future.

On the flip side of that, we are in the pits of a bear market. In an even decent risk-on environment or spontaneous NFT revival, etc. or anything that causes volume to pick up on Ethereum, this topic will become way more important as the potential payoff becomes greater from increased order flow.

Again, the goal not being to eradicate MEV (per Vitalik) but eradicate the centralization and predatory nature around it, to enable the best UX possible for those who find the promise land of Ethereum.

MEV will continue to be a hot topic but I am not certain what the golden opportunity for the retail speculator will be, or if there will be one at all the more I learn.

That being said: the world of MEV is endlessly fascinating and will make for some great crypto drama for years to come bc:

LEL.

To this point, I am very happy to put MEV down for the foreseeable future. The field is changing literally minute-to-minute and as such can be excruciatingly frustrating to write about. You begin a piece on Monday morning and have to re-write it by Tuesday lunch. But that is also just the nature of this exciting acropolis/necropolis we call crypto.

Moreover, I am just a bit out of my depth on the technical aspects and there is a lot to be confused for the non-Solidity fluent. Again, the goal of this format is to write about what lights me up so if I get bogged down I’ll know it’s time to chart a new course.

For those who have read this far, thank you so much. It always means a lot and I hope there is some actionable value in the waffle for you.

For one-off ideas/ plays regarding MEV in the future, will likely just tweet so give me a follow there if you haven’t yet.

If you liked this piece please subscribe and consider collecting it to support and take part in my Proof-of-Thought Experiment which will start soon!

As always, nothing here is to be taken as financial advice. I write so that I may learn more deeply about crypto, the world, and connect with others. None of us should be making investment decisions based off random cartoon character internet musings without due diligence. As in every other facet of life, no one has any idea what they are doing; alas, least of all me—I promise you.

Crypto remains, and likely will always remain, a boutique and nascent market with high risk. Everything here is still one giant experiment and if anyone tells you otherwise they are lying.

Appreciate you all. All the love; all the power; all the profit.

smol thots, big hugs 🙏🤝💚🫡