Dialogue bloXroute: The path opened by Flashbots makes it difficult for DeFi to surpass CeFi

Guest: Uri Klarman, bloXroute CEO & Co-founder

Interview & Editing: Jack, BlockBeats

Compilation & Organization: Kaori, BlockBeats

When mentioning DeFi Summer, people often think of Uniswap and Aave, while when it comes to MEV, most think of Flashbots. However, when we see the name bloXroute, many may not have heard of it. In fact, during DeFi Summer and even earlier, the BDN (Blockchain Distribution Network) and RPC routing services provided by bloXroute had already gained favor among most DeFi participants. According to BlockBeats, at its peak, 90% of DeFi transactions and MEV activities in the market used services provided by bloXroute. All of this happened before Flashbots introduced the concept of MEV.

Recently, BlockBeats interviewed Uri Klarman, CEO and co-founder of bloXroute, to discuss the development history of bloXroute, the current state of MEV, and his views on the future development path of DeFi.

"The Original MEV"

Before entering the crypto world, Uri was an Israeli software engineer. Later, while pursuing a PhD in computer science in the United States, he was introduced to cryptocurrencies. The co-founder of bloXroute, Professor Alex Kuzmanovic, was Uri's former mentor.

Alex is a renowned professor in the field of computer networks, and the two hit it off immediately, collaborating on a system called "Webcoin" and publishing a paper. Unlike PoW, Webcoin did not require extensive computations; instead, it crawled and indexed all web pages on the internet, creating an index similar to that owned by Google.

By around 2016, the idea of Webcoin led the two to start thinking about blockchain and cryptocurrencies. They realized they could build a system that rapidly disseminated information over the internet, naming it bloXroute, as it combined block and transaction routing. During this period, Bitcoin faced many debates, and their idea was that if blocks could be sent faster and more integrity could be spread, it might support larger blocks, reduce the time between blocks, and help scale the blockchain.

Fast forward to the summer of 2020, the DeFi craze swept the entire industry. Uri realized that if everyone could see transactions faster, they could send transactions quicker than in Ethereum's mining pools. Essentially, by rapidly acquiring information and sending it quickly, people could make better trades, which is essentially the lightning network of the DeFi space.

Suddenly, all DeFi traders became "clients" of bloXroute. People used bloXroute to scrape, view, and execute their transactions, and they wanted to send transactions without being seen, which is why they chose bloXroute's private RPC and order flow. Before Flashbots emerged, bloXroute was the first to do this.

BlockBeats: Let's start with a brief introduction, such as what you did before, how you entered the crypto space, and why you decided to establish bloXroute?

Uri Klarman: Fast forward to the summer of 2020 during the DeFi craze, we had some fleeting panic. If everyone could see transactions faster, everyone could send transactions quicker than in Ethereum's mining pools. The essence is to acquire information quickly and send it swiftly, allowing people to make better trades.

This is essentially the lightning network of the DeFi space. If you connect Chicago and New York with fiber optics, and you are a millisecond faster than others, you will leap into the New York sky, becoming the first to reach Chicago, and then buy and profit before others because you are fast enough.

So suddenly, all DeFi traders became our clients. They wanted to use us to listen for blocks, view and execute other transactions, and send transactions without being seen. So they chose what we call private RPC and private order flow. Looking back, what we primarily did was called protected transactions. Before Flashbots existed, we were the first.

We allowed users to send private transactions through their mining pools that were not visible to others, and then Flashbots appeared, and suddenly MEV became a thing. We operated a Flashbots relay, and all searchers became our users and clients because they wanted to see other transactions.

At the beginning of 2020, we didn't have real paying customers, and then within five quarters, we earned $10 million annually, which was a powerful transition from 0 to 1. Then Ethereum transitioned from PoW to PoS, and mev-boost emerged.

Now we have multiple roles, and like others, we are a block builder. We build a small portion of blocks on Ethereum, but the scale is very small, and we do not invest heavily in this because it competes with our clients. We are more of an MEV relay, taking from block builders, giving to proposers, and then sending to everyone else.

We provide all our services to MEV searchers, with clients ranging from Windermute and Jump to large trading firms and an unnamed independent searcher in a basement in Taiwan, as well as anyone else.

Returning to my journey, I started as a researcher and then founded a company. I have been in this industry for about seven years, but deep down, I am a network person first and a crypto person second.

BlockBeats: How did people discover bloXroute and its products during the DeFi Summer explosion? Was it initially aimed at institutions or retail?

Uri Klarman: At that time, we had 16 people, and basically everyone was a developer. We had no sales, no customers, no sponsorships. MEV searchers and DeFi traders spread the word, telling each other that they were using our services, and we reached a peak of routing $1.5 billion in transactions daily during the DeFi bull market.

This accounted for about 40% of on-chain DeFi transaction volume being completed through the services we provided to users and clients. They used our services to execute trades, arbitrage, liquidate, manipulate, and perform all imaginable operations. When the bull market ended and the bear market arrived, this data significantly declined. Our current revenue is now a little over half of what it was at the peak of the bull market, but we are still providing routing services for everyone's transactions.

BlockBeats: How much were you making daily during the DeFi frenzy?

Uri Klarman: Our annual recurring revenue (ARR) once reached $10 million, which means we were earning about $900,000 a month. Although our revenue has decreased somewhat now, our market position has actually improved. During the peak of the bull market, people didn't care; they would buy your services, feeling that everyone was wealthy. When the bear market arrived, people started thinking about where they should spend money or where they shouldn't spend money.

Many of our users indicated that they were now shutting down because they were losing money no matter what they did. They said they liked our product and would continue to use it in the future. The reason they stopped using it wasn't because it wasn't valuable, but because they had to stop all business.

So from 2021 to 2023, we worked with large developers, collaborated with DEXs, and had many interesting collaborations and discussions, many of which related to the valuable infrastructure we have regarding DeFi trading and MEV.

Not Following Flashbots' Path, DeFi Needs to Compete with CeFi

BlockBeats: Interestingly, while bloXroute initiated the project that gave birth to the MEV concept, Flashbots is the company that proposed this concept.

Uri Klarman: In the era when MEV began to gain popularity, there was nothing called MEV. All mining pools knew they shouldn't participate; it was like a referee scoring a goal. Many mining pools stated that they knew they could, but they wouldn't do it because it would be bad; it was a taboo, and everyone would be unhappy with them.

Then the lightning network emerged, tearing down all the red lines. It was like saying, "It's okay, you should do this because if you don't, others will." Then within six months, Ethereum developers completely changed their view, believing that now MEV was acceptable.

Therefore, I believe MEV is not a zero-sum game but a negative-sum game, which is really bad. If validators (formerly miners, now validators) maximize the extraction of more and more value from DeFi, then the corresponding value in the pockets of DeFi users and LPs will decrease, making DeFi worse and worse.

In this way, DeFi becomes uncompetitive. If DeFi becomes worse, the activity and liquidity on DeFi will decrease. For example, if I want to buy Ethereum or anything else on Uniswap or Coinbase, I am a retail user without five monitors to track prices at all times.

But I just want to buy ETH at the current price. If I go to Coinbase, I can buy it at the current price. But if I buy on Uniswap, I will get the worst execution result, which is the worst price I am willing to accept. There is not much choice for me.

So DeFi performs poorly compared to CeFi. If DeFi performs poorly and is not that useful, it will have less liquidity. In fact, this will give validators less MEV, which is very shortsighted. Don't get me wrong; I am a huge supporter of DeFi, and I believe DeFi is very valuable. It is transparent, permissionless, global, and provides a unified financial infrastructure that operates 365 days a year, 24 hours a day, which cannot be manipulated, is very valuable.

I remember at the Pantera summit in 2019 or 2020, the head of the CFTC in the U.S., one of the regulators, told the audience that when Bear Stearns went bankrupt in 2008, Obama appointed him. He was in the decision-making circle at the time, and they had to decide whether to save it or let it collapse. They had enough money to save it, but if there were 20 Bear Stearns, they couldn't save them all.

So their decision at the time was to let Bear Stearns fail; they did not save it, and then the 2008 global financial crisis occurred. After delving into how much money each bank had and what they held, everyone realized that it was impossible to see who held what. They could have salvaged the situation, just like today's Detroit. If we could transparently understand what was happening in the banking system, we could completely bypass it, as has been very evident in the recent Silicon Valley Bank and similar events.

What we are waiting for is whether DeFi solves these problems. People do not understand how powerful and valuable this thing is. DeFi can know exactly what each protocol and institution has, how much they have, and the risks they are taking. So I believe DeFi is crucial and should compete with centralized finance, rather than being its sidecar. But the current way of MEV does not lead us in that direction; it makes DeFi worse and hinders competition with CeFi, so I am exploring alternatives to MEV.

Validators should not just increase their share of the pie but make the pie bigger, like 10 times, 100 times, or 1000 times. This is much better than capturing 50% or 90% of the share and making the pie smaller. So I am a super supporter of DeFi, but I believe our current MEV approach does not support this and is not good enough for DeFi. I am working with various partners to try to improve something.

BlockBeats: What do you think of Flashbots and its high valuation?

Uri Klarman: I really like some people at Flashbots, but liking these people doesn't mean I agree with some of their views. Their early agenda was to minimize MEV as much as possible because MEV affects everything that happens. The parts that cannot be reduced should be democratized. This way, it is not just large validators who can extract it; everyone can use it, thus generating centralized power.

As we discussed, mev-boost means that if everyone can access these third-party block builders, then everyone will receive similar APY. But I think the result we see in reality is that we are maximizing MEV, and from my perspective, the outcome is not good. That is to say, the result is not to reduce MEV but to maximize MEV.

If all validators use the same API, then perhaps maximizing MEV is valuable; theoretically, it can avoid centralized power. What we observe is that block building is heavily controlled by CeFi and DeFi arbitrageurs, with the top three participants accounting for about 70% of block building share.

But returning to my earlier point, I care not only about whether DeFi succeeds or fails and the issue of competing with CeFi. The current situation is that the MEV that was previously extracted by Jump, Wintermute, and DeFi traders (such as HFT, DeFi arbitrage, etc.) is now flowing to validators. But this does not help DeFi users; DeFi users are still losing money, and Uniswap LPs are also losing money. This money is not flowing to traders but to validators, which does not help DeFi.

Perhaps in the future, we will have MEV destruction, so that money will actually be destroyed. However, this still does not help DeFi users; they are still losing money. Therefore, I am more interested in solutions that focus on increasing the value of DeFi and have the ability to compete with CeFi, rather than focusing on finding ways for everyone to share in MEV.

Some solutions, especially those like order flow auctions, are basically like this: you make a trade, and I make money, rather than me hitting you over the head and directly taking $100 from your pocket. I operate behind your trade, and if you lose money, I will return some to you. While this situation is slightly better than being robbed directly, it is still not a good solution, especially if now all order flows are going to a very small number of participants.

Flashbots is exploring work like Sauve, which is a different L1 that focuses on MEV and allows coordination of all MEV across multiple chains. This is a very complex process, as it is not just about making a trade but making a meta-trade and handing it to searchers, who will compete in a bidding-like manner to see who can get that trade and then hand it to builders participating in this alternative L1.

Another thing is that there is actually no real cross-chain MEV; what people are talking about is cross-domain MEV, which is also the case if there is arbitrage between DeFi. Because CeFi is 50 to 100 times larger than DeFi, 60% of MEV is arbitrage between CeFi and DeFi. If you delve deeper, you will find that 91% to 99% of the value actually belongs to validators, but when you are doing CeFi and DeFi arbitrage, about 55% of the value belongs to validators.

You trade here, trade there, and maybe you will make money, but you have to take risks. If you don't make money, you won't do it. You also need a lot of liquidity, whether on-chain or on CEX, so it is not that competitive. Therefore, CeFi and DeFi arbitrage is much larger than arbitrage between Ethereum and Cosmos. As my main point, DeFi needs to compete with CeFi, and currently, DeFi is not good enough, like a sidecar trailing behind CeFi, mainly used to capture arbitrage.

Making MEV Auctions Disappear

BlockBeats: Will MEV and MEV auctions be a significant part of bloXroute's business?

Uri Klarman: That is indeed the case. We are a profitable company, but I want to make money in a way that adds value to DeFi and does not lose value, and even in that world, I can make more money. So I hope DeFi can compete with CeFi, and I believe I will find a product that fits the market. If today you give me a magic wand, I can magically change the MEV landscape so that it no longer operates like any auctions we see today, but rather on a first-come, first-served basis, along with some other things that allow DeFi to compete with CeFi.

Then I would have to rethink everything we do in our business; I want to make this party bigger. Currently, we are deploying our MEP (multichain event protocol) solution for BSC, and you can imagine we built an MEV solution that allows everyone to compete with us.

BlockBeats: Why do you say you can make more money when MEV gets bigger? Is there some mathematical principle behind this?

Uri Klarman: Many people holding Ethereum want Ethereum to succeed, including myself. For example, I have this token and that token; let me try doing LP on Uniswap, try this, try that. So there is quite a bit of ETH and USDC activity and some other ETH-related things.

We who want Ethereum to succeed are willing to put our money there. But those who are not in it for Ethereum want to make money through trading; where do they trade? On CeFi, not on DeFi, because DeFi cannot provide them with the best prices.

Then look at Bitcoin; many people are trading Bitcoin, and the BTC trading volume on CeFi is twice that of Ethereum. And 99.5% of things happen on CeFi, while only 0.5% happen on DeFi. Why don't they trade on DeFi? Because DeFi is not good enough. Again, it doesn't matter whether you like Bitcoin or not. Is DeFi useful? Will people trade their Bitcoin on Ethereum? The answer now is no.

Once we make DeFi more valuable and competitive with CeFi, the volume of Bitcoin trading on DeFi could be similar to or greater than that on Ethereum, because the trading volume we see on CeFi is twice that of DeFi. But now, what percentage does DeFi hold? Can we get it to 50%? Can it reach 500%? I hope DeFi wins; I don't want DeFi to be just a small part.

We know that CEXs can go bankrupt; the recent one was FTX, and it can be traced back to Mt. Gox and other similar events. This is not the first time, nor the second, third, or fourth time we have seen this. Even knowing that CeFi can go bankrupt, people still put their money in CeFi rather than DeFi; why?

We are not just talking about ordinary people like you and me, but professional venture capital firms and funds that understand the risks. They choose to trade because CeFi is better. We need DeFi to get better to compete with CeFi, and if we can do that, the market share could expand 10 times, or even 100 times, and ultimately, I believe we can expand it 1000 times. That is why I don't want to prove the current share of the DeFi market but rather think about how to capture 30% or 50% of a market that is expanding 100 times.

BlockBeats: Will the situation you just described provoke a lot of reactions from the MEV community? Will the term MEV still exist in the future?

Uri Klarman: I believe MEV will always exist. Flashbots hopes to define success; they want decentralization, just like we do, but I care more about usability than others. I believe that if no one uses the most decentralized thing, it is useless. I don't want to build it; I want it to be decentralized and useful. Usability cannot be thrown away; otherwise, everything we are doing here is meaningless, or at least its significance is reduced by a thousand times.

Therefore, there is always value to be extracted, but you can set an option—everyone sends their trades to me, and whoever pays me the most, I accept that, and reject the others. Or you can extract a basis point from the volume and try to do it in real-time, first-come, first-served, just like a centralized trading platform, providing the same utility to get the current price, with no one cutting in line, always getting the right price because arbitrageurs will trade, and prices will fluctuate in one direction.

Can we achieve pre-confirmation? How do we achieve first-come, first-served? What is fair? I am not saying these questions are trivial, but my point is that this will actually allow everyone to earn more money, which is more valuable for users and also more valuable for validators. So this is not about making MEV disappear, but rather making MEV auctions disappear.

BlockBeats: So MEV itself is neutral, but MEV auctions are the part that everyone likes to participate in.

Uri Klarman: In my view, auctions are the worst part. Do you know why people hate high-frequency trading firms? We don't want decentralized finance (DeFi) to become centralized finance (TradFi), right? We don't want high-frequency traders to come in and play their picoseconds (editor's note: 1 picosecond equals 10 to the power of negative 12 seconds (1 ps = 10^-12 s), used to describe extremely short time spans in high-frequency trading and other financial fields).

Why do we hate them? Because they engage in manipulative trading, whether through monitors or other means. They see your trade come in, and you could have bought at the current correct price, but before you, they already bought it, so you bought at a higher price because they saw your trade and executed based on that.

Now, the MEV auction movement has come. If someone starts trading faster than others, they will get that price. That's fine; I'm not saying I don't have 10 different monitors and complex setups in front of me. I just want to send a trade and get the current price, and no one can adjust their trade because they see what I'm about to do and trade in front of me.

Simply put, if I initiate a trade and someone else also initiates a trade, regardless of the order, whoever arrives first wins. Sometimes they win, sometimes I win; it depends on who sends the trade first and when. My point is that if I send my trade, others can only see it after I complete it and cannot act before that.

So I believe MEV is not a neutral force, and there is no good MEV and bad MEV. However, there is indeed bad MEV, known as front-running, which means seeing someone's action before they take it and extracting value before that. This is different from arbitrage or back-running; back-running is just a more advanced term for arbitrage, meaning I will capture the arbitrage opportunity after you or act immediately after I see your behavior.

This is actually a good thing; I like arbitrage. If the price on Uniswap is one value, the price on Balancer is another value, and the prices on Binance and Coinbase are the third and fourth values, whenever a trade happens somewhere, I want arbitrageurs and high-frequency traders to continuously correct the prices so that the prices are always correct. So when I send my trade, I will get the current correct price; that is what I hope to get from DeFi.

BlockBeats: Will this replace the role of crypto market makers?

Uri Klarman: No, the two are actually the same thing. People trade, and if the price is not right, market makers will try to capture that spread. The main difference is that validators no longer say, "Listen, I'm about to create the next block; how much will you pay?" and then the price fluctuates to some point.

Instead, they should make the validator's share as large as possible, but this is just a very small share because it is not very useful. On the contrary, you can imagine they won't do that but will process trades in real-time on a first-come, first-served basis and charge a basis point fee. Due to the many activities in those 12 seconds, prices rise, fall, and rise again. By continuously correcting prices, validators will earn substantial profits like all traders and DeFi arbitrageurs. They have no opportunity to extract funds from DeFi; instead, they will charge fees to capture funds, which will make DeFi better and able to compete with CeFi.

So capturing a basis point fee is equivalent to how much we put in. But if we expand it 10 times, 100 times, that is definitely a better option if we can do that. But the question is, should we do this? Should we achieve the goal of "real-time, first-come, first-served, fair ordering"?

BlockBeats: How likely do you think we are heading in the direction of Flashbots and all the MEVs currently being discussed, which you don't like? Which direction might we develop?

Uri Klarman: If there is a question that can replace this one, it would be like asking how likely you are to succeed in pushing DeFi into a different realm. If you are a founder, you would say, "I am here to change the world." And it is difficult for a founder of a large company to try to do big things. Unless you are an individual like me, I think I will change the entire operation of DeFi because I believe I can do it. Most people would say, "Uri, you can't do it," or I would ask myself, "Can I change everything?" They would say no, and I would think, "Yes, I can change everything." This is less about ability and more about a personal trait, the conviction that you can do it.

If you are in academia, it is like writing a paper for your second major that gets rejected, and then you adjust it and send it to others, and it gets rejected, and rejected, and rejected. The first rejection hurts a lot, the second hurts a lot, the third stings a bit. After that, you just wait for rejection letters and send it out again. But then you will have many papers; one will get accepted here, another will get accepted there.

Maybe you can't imagine a successful path. We will try that, but it doesn't work; we will do this, and it won't work either, and then we will do this, and eventually, we will win. Returning to your initial question, we are now on the trajectory of MEV auctions and the development of DeFi, which makes DeFi less useful and unable to compete with CeFi. But I believe we have the opportunity to change that; we have the chance to move toward a different path and trajectory that allows DeFi to compete with CeFi, which is the future I am striving for.

BlockBeats: What projects or teams is bloXroute currently working with?

Uri Klarman: Alex Mizrahi, who once worked at Flashbots (he used to work at Flashbots, but I think he has left now), made a very good comment in a chat, saying, "You can't imagine how many people in the lightning network really want to see a better future than what we have now." I don't remember the specific details, but they all want to see a world where DeFi coexists with CeFi, rather than extracting all the value.

What we need to think about is how to achieve that goal, what methods to take, and the pros and cons of each direction. Most people I meet in the DeFi space believe this is a good future, and very few do not wish to see such a scenario.

Some people say we cannot achieve such a future; some say I think it is unfeasible, and we cannot achieve fair ordering. But we can try to do this, broadcasting from the other side of the DeFi world and gradually getting closer to you, so that even if someone sees your trade, they cannot cut in line because the speed of light is helping you prioritize unpacking.

In simple terms, if you send a trade from the farthest place to the nearest place, taking 100 milliseconds, then even if someone next to you sees your trade and is a few seconds faster, they cannot surpass you within 100 milliseconds because the speed of light is in your favor. We have a significant advantage in this regard.

Can we do it? Can we overcome these enormous technical challenges? This is the direction I am striving to explore, where DeFi competes with CeFi, and usability is crucial. How do we achieve this? How do we achieve democratization? If we do not extract MEV, then someone will always extract that MEV, so we need to democratize it and try to ensure everyone can share fairly. Perhaps we will destroy it, or validators will receive it.

BlockBeats: bloXroute also has a small part of builder business; please talk about the market of "builders" (Block Builders) and "producers" (Block Producers).

Uri Klarman: If there is a searcher who discovers an opportunity and wants to seize it, whether it is on-chain arbitrage or trying to back-run or front-run bundled trades after seeing a trade, they often do not know how much to invest and end up putting in almost all their funds.

These searchers do not know what other searchers are doing and how much they are betting, but basically, they have to bet almost all their money. Block builders are mainly CeFi and DeFi arbitrageurs who collect searchers' bundles, etc., through the 12-second UniSwap price to conduct massive ETH, USDC, BTC, ETH, or USDC, USDT, etc., CeFi and DeFi arbitrage, as the UniSwap price updates every 12 seconds, allowing them to flexibly adjust the fees they actually pay at the last moment.

Block builders will build a block that can store longer over time to create better blocks, continuously improving and building better blocks. They start bidding in the last 200 milliseconds, trying to be the highest bidder while also comparing how their captured value stacks up against others.

If they earned $1000 in capturing CFA (like USDC), they might propose $500, and when they see another block's value is $600, they might propose $610, and this change happens very quickly at the last moment because only at that moment do they truly understand what the opportunity is. Prices change in real-time, and if you place a bet within five seconds, maybe the price will drop, and you might lose money. So you want to wait until the last moment to place your bet.

You can see an interesting dynamic where, when block values are low, many proposers rush to bid before reaching the best value expected by the proposer, constantly proposing the best price in an attempt to secure that block. They do not reveal all the value because it does not make sense for them.

Capturing CeFi-DeFi arbitrage carries risks; perhaps the price on CeFi has already changed during the execution of the trade, leading to losses, so compensation for risk is needed while also needing to profit. If they cannot earn a basis point or two in profit, they will not do it. That is, if there is no profit, it is not worth it for their business. Therefore, we find that CeFi and DeFi arbitrageurs are better suited for block building, able to capture C-D arbitrage in reality and adjust the actual amounts paid or not paid at the last moment.

BlockBeats: It is said that the Builder market only has a few big players, and individuals cannot profit from it. What do you think? Should we address this issue?

Uri Klarman: If you just want to be a searcher, you can create a bundle, borrow a million dollars to trade, buy here, sell there, and you earn $1, returning the loan. For example, you earn 99 cents, give 90 cents to the validator, and net 9 cents. If this doesn't work, the loan will be returned; there is no risk, and it won't belong to the block builder, but anyone can do this from anywhere in the world.

If you want to be a block builder, you need the ability to capture CeFi and DeFi arbitrage opportunities. To do this, you need a lot of money and to have substantial funds on centralized trading platforms and in DeFi. It is not simply about transferring ETH bought here to another place to earn a profit; that is, buying $1 million of ETH in DeFi and selling $1 million of ETH on Coinbase or elsewhere, where the general holding remains unchanged.

You need millions here and millions there; you actually need another million. Therefore, a lot of capital and risk management is required. This is a very large operation; you not only need to do KYC on centralized exchanges, so not many participants are doing this. Even if there are, their regulatory risk tolerance varies. Therefore, some will trade tokens, while others will not, because some large high-frequency trading firms do not want regulators to be angry about this issue, while others may take the plunge and do anything.

So you need some different schemes to meet different CeFi and DeFi arbitrage needs, but they are all large and consume a lot of capital. Because of jurisdiction, trading in the U.S. becomes more difficult, but if in the Bahamas or similar places, they may not care much about regulatory issues.

We are now working with partners to explore bridging this gap. Imagine you do not need to be a CeFi or DeFi entity but a researcher, a large CeFi participant who will give you a quote to trade, allowing you to buy ETH at that price, but that price does not exactly equal the CeFi price because they will profit from it while also providing CeFi pricing to DeFi participants.

So those small participants who do not have substantial funds on CeFi may suddenly become participants who have funds and provide quotes to others. However, they will charge a fee on this basis, which may make the entire ecosystem more profitable; this is what we are exploring.

BlockBeats: I think BSC is also very important to bloXroute; can you explain the relationship between BSC and you in detail?

Uri Klarman: We have played an important role in the BSC space for a long time. At the end of 2020, there was a lot of trading activity on BSC, so people liked DeFi and cross-chain trading. DeFi was happening on Ethereum, and DeFi was also happening on BSC, with others being an order of magnitude smaller. Arbitrum has been developing; you might want to add Arbitrum to the list four months ago. After Friend.Tech emerged, we might see more activity on Base, but the real activity is happening on Ethereum and BSC.

So Ethereum encompasses the entire development of the MEV ecosystem, with mapping and proof of work, etc., and we can see its development changes. On BSC, people use our products to quickly acquire blocks, but we have only recently started working with validators to help them build better blocks.

Similar to the arguments of Flashbots on Ethereum, we want all validators to receive roughly the same APY. If some do better and some do worse, then some will have higher APY, and everyone will stick with them; this is a centralized power.

So we decided to build a method that allows validators to accept third-party blocks, not just from bloXroute but from others as well. Thus, we built this infrastructure that allows others to compete with us, and we are confident in our competitiveness.

We allow each validator to build their own block and receive a block from us, then choose from it. We can continuously build better blocks because we can see transactions faster and see blocks faster.

So we are attracting MEV searchers, trying to capture arbitrage, etc. It is a bit like the chicken and egg; in a growing network effect, we already have many validators, so we have more searchers. The more searchers use us, the more value we create for validators. So we find ourselves collaborating with validators to help them improve APY and also collaborating with DeFi participants.

Whether we have a partnership with PancakeSwap or not, basically everyone can send trades to us, and we will protect them from manipulation. We will trade after that, and if there is realizable value behind it, we can capture it and give part to the validators and part to the searchers. Suppose you leave $100 on the table, but you are only trading here and not on all Dexes; then that is not a good trade, and we can provide some rebates. Most importantly, front-running; if you are about to make a large trade, you will definitely want to send the trade through us.

We have good collaborations with the BSC Foundation, validators, and DeFi participants to build something different from what we see on Ethereum because BSC is different; it is between block builders and validators, and the number of validators here is small. So we will try to hand a block to validators, and if they want to solve this puzzle, they can do so, thus preventing sandwich attacks. We have a good partnership with BSC and can see it gradually developing over the past few months.