Skip is integrating the Injective network in order to further make Injective the only truly MEV resistant blockchain. In turn, this will also help enable higher potential staking rewards for delegators on the PoS L1 protocol.
Injective is already an MEV resistant blockchain with the first decentralized application of a Frequent Batch Auction (FBA) process for ordering transactions. The integration with Skip will bring the MEV resistance functionalities to new heights by ensuring that any form of MEV value is given back to users operating within the Injective network or utilizing its dApps.
What is MEV?
MEV stands for Miner Extractable Value or Maximum Extractable Value. It is the maximum amount of value that can be extracted from the block production process. This can be achieved via reordering or inserting new transactions by network participants.
Typically, validators and network participants are able to pay higher gas fees in order to increase the likelihood that their transaction is included in the next block. A common example of this is trading related dApps such as DEXs in which a malicious actor can view a trade and pay higher gas fees to ensure that their trade is processed first instead to realize arbitrage opportunities. This of course can lead to less utility for the end user and a far poorer user experience in general.
How does Injective Currently Solve the MEV Issue?
Injective utilizes the first ever decentralized implementation of a Frequent Batch Auction in order to eliminate MEV. In fact, Injective is currently the only truly MEV resistant blockchain.
The Frequent Batch Auction (FBA) model is commonly proposed in economic journals as the definitive solution to capital inefficiencies related to common trading practices.
The FBA is defined by the following three features: discrete time, uniform clearing price and sealed bid. A more extensive discussion of the FBA model can be found here. Essentially, transactions are all batched together at the end of a block and one of the transactions is randomly selected to be added without prioritization based on the gas fee paid at a uniform clearing price. An auction process occurs at the end of every single block on the orderbook module created by the Injective community. This in turn leads to the most capital efficient decentralized trading experience for institutions and retail users alike that is able to mimic the user experience provided by centralized entities.
The instant finality feature of Tendermint’s BFT-based PoS consensus that Injective utilizes, corresponds startlingly well to FBA executions at the end of each interval. Since the FBA does not take into account time priority within auction intervals, it is the perfect market design for blockchains that operate on the same basis. The design parameters market design fits the bespoke Injective infrastructure stack like a glove.
What Additional Value will the Skip Integration Bring to Injective?
The integration with Skip will help to heighten the MEV resistant properties found within Injective.
As described above, Injective’s orderbook module already helps to eliminate MEV and frontrunning issues on-chain by running an auction process at the end of every single block. Skip will take this functionality to the next level by also running a segregated auction process at the beginning of every block to push users to compete for lucrative arbitrage and liquidation opportunities. The rewards of those auctions will then be sent back to the community such as Injective stakers.
As new dApps continue to launch on Injective, new opportunities for potential MEV may arise. For example, the upcoming Astroport deployment on Injective can generate a substantial amount of cyclic arbitrage opportunity. Skip will integrate with Astroport’s frontend to ensure that DEX LPs are adequately compensated for any potential arbitrage loss.
Another example of value capture can occur in the auction mechanism for liquidating assets on derivatives exchanges built on Injective. Liquidators can use Skip’s tooling to compete within the same block to submit the maximum price in INJ.
The potential rewards would then flow back to INJ stakers which would increase the effective APY for users on-chain.
Skip has already completed a successful integration with the Injective testnet and is slated to go live soon thereafter. Skip will begin by running tests with a select group of Injective validators before rolling out across all validators operating Injective nodes.
Injective is now solidly positioned to be the most complete MEV resistant blockchain in existence.
Injective is a lightning fast interoperable layer one blockchain optimized for building the premier Web3 finance applications. Injective provides developers with powerful plug-and-play modules for creating unmatched dApps. INJ is the native asset that powers Injective and its rapidly growing ecosystem. Injective is incubated by Binance and is backed by prominent investors such as Jump Crypto, Pantera and Mark Cuban.
Skip helps sovereign blockchain ecosystems leverage their blockspace markets to enrich network stakeholders and protect users from the harmful effects of MEV. Skip is backed by prominent firms including Bain Crypto and Robot Ventures.