Marinade Finance offers new governance proposal to tackle oversized role of MEV

Solana DeFi platform Marinade Finance has introduced a set of governance proposals aimed at combating uncontrolled MEV to ensure decentralization and security in the ecosystem.

Marinade Finance published the governance proposal titled “Fighting Malicious Validators and Democratizing MEV on Solana” on the Marinade community forum on December 11th. Solana (SOL)-based non-custodial liquid staking protocol solicited feedback from its community. Recommendations for managing MEV.

MEV, which stands for Maximum Extractable Value, is defined as the value obtained from the transaction sequence. Marinade sees MEV as “both a challenge and an opportunity.”

This is because MEV has the potential to increase the efficiency of the network by optimizing liquidity, improving price discovery, and rewarding validators. However, when left unchecked, MEV can make the ecosystem vulnerable to sandwich attacks, front-running, and risk centralization.

In an email to Crypto.news, Marinade Finance CEO Michael Repetný emphasized the importance of maintaining decentralization, transparency and innovation in blockchain. Therefore, he believes that addressing the challenges posed by malicious validators and MEV is crucial to the health and sustainability of the Solana ecosystem.

“At Marinade Labs, we know that MEV cannot be eliminated, but its impact can be managed and its value can be distributed fairly,” said Repetný.

Repetný explained that in a recent share auction market organized by Marinade, validators were able to bid on rewards on Solana well above reasonable standards because the system is open and transparent. He said that without appropriate data, the team was unable to distinguish legitimate validators from those participating in malicious MEV activities.

“Some external studies have confirmed our observations, explaining that the value of negative MEV externalities is not only growing but also becoming centralized rather than distributed among many actors.”

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In the forum post, Marinade Labs explained that MEV can be addressed with strategies that prioritize reducing harmful MEV and redistributing inevitable MEV through open markets. The first involves the creation of a public committee responsible for monitoring validators.

The committee will seek to identify malicious validators who have been proven to have harmful actions. After determining which validators are bad actors, the committee will cut PSR bonds. This action is taken to prevent future malicious activity from other validators and protect the network.

The second recommendation is to reopen the public memory pool to decentralize access to MEV. The staking protocol argued that the distribution of MEV deals in public memory pools is much fairer compared to private memory pools, which risk centralizing the deal flow.

The third and final proposal involves the allocation of treasury funds from the Marinade DAO or MNDE DAO for research on Solana MEVs. Research initiatives aim to analyze MEV trends, risks and opportunities, explore strategies to reduce harmful MEVs, and develop tools to make MEV more transparent and inclusive.

Research findings will be used to guide future governance decisions and create improvements for the Solana ecosystem.

Repetný stated that MEV-related research should be a top priority for the Solana ecosystem, as it will help developers identify the problem and mitigate MEV.

“Funding MEV research to gain better visibility into the problem, such as which platforms suffer most from negative MEV, quantifying the problem, and bringing together existing pieces of research, such as “Sandwich-resistant AMM,” into an actionable list of how to reduce MEV.” negative externalities.”

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