Bringing Skip to Comdex: Sovereign, Non-extractive MEV Markets

[Magmar-Skip]

Comdex <> Skip Proposal

Proposal

🎉 Upon the encouragement and invitation of the Comdex core team, Skip (skip.money) would like to work and integrate with the **Comdex ecosystem** to launch Skip’s healthy, frontrunning-resistant MEV protocol and bring:

1. frontrunning/sandwiching protection
2. increased rewards to stakers
3. better transaction execution infrastructure
4. end-to-end privacy for traders
5. network protection from black-swan events.

A Skip integration on Comdex has substantial potential for recapture as volume grows, given Comdex’s roadmap includes lending, DEXes, and stablecoins.

Intro

💡 Skip is building cross-chain transaction execution products customized to individual app-chains to bring financial sustainability and increased rewards via MEV, without the downsides of toxic MEV for users.

Skip has built infrastructure that allows users and traders to pay for transaction prioritization and front-running protection in a sealed-bid, closed auction.

Skip is fully configurable, with controls around what kinds of MEV are allowed and how revenue from the auction is distributed among validators and the network. Skip will enable Comdex to:

1. Passively increase the block rewards validators and stakers on Comdex earn by introducing payment for prioritization, which will increase network security, TVL, and competitiveness
2. Potential to financially sustain gas-free transactions in the future
3. Protect the user experience from extractive strategies by preventing gas wars and preventing toxic forms of MEV, like sandwich attacks on public DEXes
4. Defend validators from spamming and other DDoS vulnerabilities that have recently affected other chains

Our Progress

We are currently deployed on (you can view at skip.money/dashboard)

1. Juno
2. Evmos
3. Terra2

In progress:

1. Osmosis (on-chain arbitrage module, passed through governance)

Our Proposed Solution for Comdex

Generalized MEV recapture: Top-of-block Auctions via mev-tendermint

🎉 `mev-tendermint` is open-source and can be inspected on our github here: https://github.com/skip-mev/mev-tendermint

Skip can deploy its core auction natively on Comdex to facilitate competitive blockspace auctions for any MEV opportunities that will arise from:

• Arbitrage to keep peg for the Comdex stablecoin
• DEX cyclical arbitrage
• Lending liquidations

The fees from this auction will benefit the entire network and divided according to the Comdex community and individual validator preference.

How it Works

• We facilitate the auction using two pieces of software:
  • “The Sentinel”
    • Highly available and massively parallel simulation and auction infrastructure that:
      • Receives bundles of transactions from traders
      • Simulates them against a look-ahead version of state
      • Forwards the highest-paying, non-conflicting bundles to validators to build the top part of the block
    • It also provably filters out any frontrunning or sandwich-type bundles.
  • **mev-tendermint**
    • An open-source, stable, mainnet-battle tested version of Tendermint with modifications to accept bundles of transactions from the Sentinel, that get ordered at the top of the block designated for MEV
    • mev-tendermint operates by introducing a new mempool-like structure, the sidecar, which receives bundles of transactions over the same P2P gossip layer that normal transactions travel over.
      • These transactions are formed into atomic bundles inside the sidecar, which the proposing validator then reaps from first when they propose a block (and the rest of the block is filled by the other txs in their mempool)
• Note, Skip does not build the entire block (only the top), or modify any of the signing logic in validators.
  • It is fully able to plug into any existing version of tendermint that Comdex uses in its current state, and will be updated with new Tendermint changes as they are released
  • Because it doesn’t build entire blocks, it is censorship-resistant

Trader Usage

• For users, we provide a simple SDK (in golang, Python, Javascript, and soon Rust) to submit transactions to our relay:
• We also deploy with ready made bots that incentivize competition and lower the barrier to entry for anyone to use Skip to bid for MEV opportunities

Payment Splits

• Skip’s sentinel requires traders to send payments to validators via a MsgSend message, included in their bundle, which is used to judge bids
• Without bounds, Skip is configurable to allow validators to choose any percentage of the MEV they keep, with the rest going directly back to the staking community via the **distribution** module.

👉 For Comdex, we propose setting bounds in a future governance proposal on these percentages, so that a minimum % goes to both the validator and stakers

Deliverables & Timeline

✨ Dec: Begin partnership 🎉

Dec - Jan: Launch Comdex <> Skip testnet, using mev-tendermint on a set of validators to check safety, with the Sentinel deployed and sending non-toxic MEV bundles. Load testing and high level parameters can be tested here.

Jan: Full audit of the mev-tendermint ahead of release.

Jan - Feb: Ecosystem-wide launch on Comdex mainnet, and long-term maintenance of the mev-tendermint binary (which is optional for validators) for Comdex with new Tendermint upgrades.

2023++: Continued maintenance and innovation for the Comdex ecosystem, including cross-chain bundles, custom open-sourced bots, and dashboards/monitoring.

Proposed Long-term Compensation

🔍 After discussion with the Comdex team, we propose the following long-term partnership agreement.

This is the compensation that was suggested by the core Comdex team.

1m $CMDX grant vested along defined milestones:
→ 20% vested on successful testnet launch
→ 20% vested on successful mainnet launch
→ 60% vested over the next two years for continued maintenance

After a minimum of 12 months, Skip can take a maximum of 5% share of MEV-generated revenue from the Skip Auction
→ This is helpful for the continued maintenance of our infrastructure
→ Skip can be replaced with a new auction provider if Skip does not maintain its infrastructure or provide satisfactory service

Voting

👉 YES: You’d like to see Skip come to Comdex, agree we should work with the core team to build a safe binary to enable it, and agree that the above compensation is fair for a multi-year integration and continued support.

NO: Skip should not integrate or come to Comdex.
NO WITH VETO: Skip should not integrate with Comdex, ever.

ABSTAIN: You have no opinion on whether Skip comes to Comdex.

[tyrionscammister]

Okay super interesting!
First off, I gotta say- I love Skip. I love what you guys are doing and I firmly believe it can benefit the Comdex ecosystem.
I also love Comdex. I think these guys mean business. They’ve been shipping non-stop ever since the community collectively challenged them.

But I wanna take a step back and ask everyone, is 1M $CMDX not a HUGE amount for a grant? I know $ value right now doesnt seem so high but surely think this is a MASSIVE grant. I’d be super open to this at a lower grant amount but at this current amount it seems excessive! I mean the SKIP guys raised a bunch of money early in the year, so surely its not like they really need all this money??

Just to clarify here- I’m a $CMDX bag holder. I do want the ecosystem to benefit from this. But I’m have my reservations about the size of this grant. At even HALF this amount I think it’d be a lot but I’d take it.

I wanna hear other peoples thoughts on this? I want to hear if someone can challenge me and justify this

[Jesus]

I think we’d have to make an estimate on how long it would take for the 1mil CMDX to be earned back through revenue and see what the returns on this investment would look like. I think it could potentially be very lucrative on comdex as we already have a dex, a stablecoin, and a lending protocol coming soon. And with more defi apps coming the earlier we launch this the better the returns.

[Leonoors_Cryptoman]

To add to this; how big are the changes from what is already developed on Juno, Evmos, Terra2 and is being developed on Osmosis? Is a complete redesign needed or can it be a look-a-like?

What is expected? Is it to be integrated in the chain (my preference) or a validator-choosing like on Juno?

[Jesus]

@Magmar-Skip is there any info showing approximately how much revenue is being earned by the protocols skip is already live on?

[Magmar-Skip]

Hello! Thanks for the thoughtful questions – all of these are valid.

Responding to Tyrion:

My opinion shouldn’t be the only one that weighs in here, but happy to talk though the “cost” of a Skip integration in dollar terms if it’s helpful to shed more light. $1M COMDEX, today, comes out to about $140k. In truth, this is less than half the usual integration cost of integrating Skip that we’ve received from other chains.

The discussion we had with the core team was that, although the ~140k will cover our infrastructure costs for about a year (massive simulation and auction infrastructure, highly available RPC endpoints, and multiple full nodes are pricey) - the bet we’re taking is that Comdex will grow and Skip will be able to sustain itself off a small auction fee in the future. This was the number that was suggested to us, and we have a history of not selling native token grants after receiving them (we stake them).

Regarding us raising, it’s true we raised a seed round of capital, which allows us to build our products at a loss during the bear market. I don’t think we’ll last long if we don’t find ways to continue building and providing services to chains that are worth paying for - so far our entire revenue model has been from grants.

Responding to Jesus:

It is very hard to say. As an infrastructure company, we are building for a more active and highly traded Cosmos. Comdex has the potential to have meaningful DeFi activity, but it will likely take at least a year to return the current $140,000 grant size in the form of redistributed rewards, which could be accelerated by the developments you mention. On a mature DeFi ecosystem, like Osmosis, you see over $6m in MEV recapture happening per year, which you can view here on our dashboard: satellite.skip.money

Responding to Leonoors_Cryptoman:

Good to see you as always - there has to be a governance medal we could award you. The solution proposed here is similar in functionality to the product we’ve launched on Juno, Evmos, and Terra2. As we spelled out in a recent commonwealth proposal here: Commonwealth, the solution for Osmosis makes the most sense when MEV can be easily bounded in complexity (until we have decentralized, on-chain auctions!)

All that said, new integrations are not cut-and-dry for us - we have to build our infrastructure for new versions of Tendermint and cosmos-SDK, and maintain our auction and node infrastructure which is expensive (parallel and low-latency simulations require us to run large-ish machines). This proposal reflects those costs, and was the suggested amount by the core team.

Responding to Jesus #2:

We’re estimating the MEV market on Osmosis to be ~$40-75k per month. On Juno, the MEV market has been roughly $3-6k per month. We’re still working through our analysis on Evmos. On Comdex, it’s very early to say. The Skip auction, in its early stages (first few months), can expect to capture ~5-10% of this. Competition grows as more validators adopt the solution, and (like in Ethereum), we’d expect recapture to grow to 90-95%. To facilitate this, we have (and will for Comdex) open-source bots so the community can participate in healthy MEV strategies (arbitrage and liquidations)

I hope that’s helpful, and thanks again

[SyndicateMike]

I’m all in for skip to build on Comdex. Integration of MEV will be huge for the network as the it grows to its full potential! I’m in favor

[Jesus]

Awesome. Thank you for the detailed response, looking forward to the partnership

[Leonoors_Cryptoman]

Thanks for the answers! I always love how to the point you guys answer the questions and don’t seem to mind the tough questions thrown at you. Kudo’s from my side.

A question regarding the grant; where will it come from? It can’t come from the community pool, since that only holds a rough 750k $CMDX (Interchain Explorer by Cosmostation).

Furthermore; regarding the MEV-stuff ran by the validators, what is the expected load on the validators? Will it require additional servers to run? Or how does it work (or is expected to work for Comdex)?

[Magmar-Skip]

Hi LC - just checked with team and this would come out of the 12.5% allocation set aside for projects building with Comdex (and is separate from the community dev fund).

I hope that’s helpful.

[Leonoors_Cryptoman]

Sounds like a good place from where the grant is coming from.

I saw that the proposal went live already, so all that is left: “good luck!”

[Magmar-Skip]

Thanks LC - happy to answer more questions if they come up as well. My telegram is @magmar100 if you ever need to reach me (and anyone else who sees this!)