Searcher

The core function of a seearcher is to construct a bundle—a set of transactions designed to be executed atomically. This involves sophisticated algorithms to:

• Identify arbitrage opportunities across DEXs.
• Execute liquidations on lending protocols.
• Optimize for Maximum Extractable Value (MEV) by reordering or inserting transactions.
• Ensure atomic execution, where all transactions in the bundle succeed or fail together.

Searchers compete to have their bundles included in the next block by paying fees to validators or sequencers. This involves:

• Submitting bundles with a priority fee (tip) to incentivize inclusion.
• Engaging in auction mechanisms (e.g., Flashbots' MEV-Boost) where they bid for block space.
• Strategically ordering transactions within their bundle to maximize profit while adhering to protocol rules.

Before submitting a costly bundle, searchers run extensive local simulations to ensure profitability and avoid losses. This process includes:

• Simulating bundle execution against a local node to check for success and profit.
• Managing slippage and front-running risks from competing searchers.
• Calculating gas costs accurately to ensure the net profit is positive after all fees.

Successful searchers operate high-performance infrastructure to gain a competitive edge. Key components include:

• Low-latency nodes (often self-hosted) for real-time mempool access and state data.
• Direct RPC connections to validators or relay networks to minimize submission delay.
• High-frequency trading-style setups where millisecond advantages can determine which searcher's bundle is accepted.

Searchers often work within a larger MEV supply chain. Their primary relationships are:

• Builders: Sophisticated searchers may also act as block builders, constructing full block proposals from multiple bundles.
• Validators/Sequencers: They submit bundles directly or via relays (like Flashbots Relay) to the entity responsible for block production.
• This ecosystem is governed by protocols like PBS (Proposer-Builder Separation) to decentralize control over block construction.

Searcher activity is driven by specific, profitable on-chain opportunities. Common examples include:

• DEX Arbitrage: Exploiting price differences for the same asset across Uniswap, Curve, and Balancer.
• Liquidations: Repaying undercollateralized loans on Aave or Compound to claim a liquidation bonus.
• NFT Market Opportunities: Sniping undervalued NFTs or executing complex bidding strategies.
• Cross-Chain MEV: Exploiting price differences between a Layer 2 and Ethereum Mainnet.

The most common strategy, where a searcher exploits price differences for the same asset across different DEXs (Decentralized Exchanges) or liquidity pools. A profitable transaction sequence is identified and submitted as a bundle to a block builder.

• Example: Buying ETH on Uniswap where it's cheaper and simultaneously selling it on SushiSwap where it's more expensive, all within a single atomic transaction.

Searchers monitor lending protocols (like Aave, Compound) for undercollateralized positions. They race to be the first to submit a transaction that liquidates the position, earning a liquidation fee as a reward. This is a critical, if competitive, function for protocol health.

• Tools: Searchers use specialized keepers and data feeds to monitor loan-to-value ratios in real-time.

A controversial strategy that targets large, pending DEX trades visible in the mempool. The searcher places one transaction before the victim's trade (to buy the asset, driving the price up) and one after (to sell at the inflated price), profiting from the artificial slippage.

• Mechanism: Requires precise transaction ordering, typically achieved by paying high priority fees or using private transaction relays.

Beyond DeFi, searchers exploit inefficiencies in other domains. This includes arbitraging NFT prices across marketplaces (OpenSea vs. Blur), sniping undervalued NFTs from mispriced collections, or capturing airdrops and other on-chain incentives.

• Characteristic: Often involves parsing complex, non-financial contract logic and reacting to social sentiment or announcement leaks.

The core technical skill of a searcher. This involves constructing a sequence of transactions that is atomic (all succeed or all fail) and profitable after accounting for gas costs. Searchers run local simulations using tools like Ethereum Tracer or Geth to test bundle viability before submission.

• Goal: Maximize the bundle's value while ensuring it is valid and will be accepted by builders.

To capture value, searchers construct bundles—sets of transactions that are atomic and ordered. These bundles are then submitted to block builders via the MEV-Boost auction protocol. This separates block building from block proposal, creating a competitive market for block space. The process ensures searchers can pay for inclusion and ordering, while builders compete to create the most profitable block for validators.

Profitability depends on speed and automation. Searchers run automated bots that continuously monitor the mempool and blockchain state for opportunities. These bots are programmed with specific strategies:

• Arbitrage Bots: Spot price differences between DEXs (e.g., Uniswap vs. Curve).
• Liquidation Bots: Monitor lending protocols (e.g., Aave, Compound) for undercollateralized positions.
• Frontrunning Bots: Attempt to execute transactions ahead of others (a practice now largely mitigated by private transaction channels).

To prevent frontrunning and guarantee execution, searchers use private transaction relays (e.g., Flashbots Protect, BloxRoute, Eden). These channels send transaction bundles directly to block builders without exposing them to the public mempool. This provides transaction privacy and reduces failed transactions due to gas wars, making strategies more predictable and efficient.

Block builders are the counterparties to searchers in the MEV supply chain. They receive bundles from searchers and private relays, then compete to construct the most valuable block possible by ordering transactions to maximize extractable value (MEV). Major builders include Flashbots Builder, Titan Builder, and rsync-builder. They submit their completed block to validators via relays.

Relays are trusted intermediaries in the MEV-Boost ecosystem that connect block builders to validators. They perform a critical role:

• Receive block bids from multiple builders.
• Attest that blocks are valid and comply with consensus rules.
• Forward the most profitable header bid to the validator.
• Ensure validator neutrality by preventing builders from learning the validator's identity. Major relays are run by Flashbots, BloXroute, and Agnostic.

A Searcher is an autonomous agent or firm that uses algorithms to scan the mempool (pending transaction pool) and the blockchain state to identify profitable transaction opportunities. They construct and submit transaction bundles to validators or block builders, competing to have their bundles included in the next block. Their primary profit motive is to capture MEV through strategies like arbitrage, liquidations, and frontrunning.

Searchers execute sophisticated strategies to extract value from block production:

• Arbitrage: Exploiting price differences for the same asset across decentralized exchanges (DEXs) like Uniswap and SushiSwap.
• Liquidations: Triggering the liquidation of undercollateralized loans on lending protocols (e.g., Aave, Compound) to collect liquidation bonuses.
• Frontrunning: Submitting a transaction with a higher gas fee to execute before a known profitable pending transaction (a form of generalized frontrunning).
• Sandwich Attacks: A specific frontrunning tactic that places orders both before and after a target user's large DEX trade.

Searchers operate within a multi-layered supply chain. They do not produce blocks themselves. Instead:

• They submit their transaction bundles to Block Builders (specialized nodes that construct full block candidates).
• Builders aggregate bundles from many searchers, optimizing for maximum fee revenue.
• The winning builder's block is then proposed by a Validator (Proposer) on a Proof-of-Stake network like Ethereum.
• This separation of roles is enforced by proposer-builder separation (PBS).

Searchers create a complex economic layer:

• Efficiency: They contribute to market efficiency by closing arbitrage gaps across DEXs.
• Validator Revenue: The competition among searchers drives up priority gas fees (tips), which are paid to validators, securing the network.
• User Cost: Their activities can increase transaction costs for regular users and lead to negative externalities like failed transactions or worse execution prices (e.g., from sandwich attacks).

The seacher ecosystem introduces critical security considerations:

• Centralization Pressure: The high cost of competitive MEV extraction favors well-capitalized, sophisticated players, potentially centralizing block building.
• Chain Reorganization Risk: Searchers may incentivize validators to perform reorgs (reorganizing the chain) to capture MEV, threatening chain stability.
• Censorship: A dominant builder could censor transactions by excluding them from blocks.
• Protocol Design: New protocols must be designed with MEV resistance in mind to protect users.

Key concepts and solutions in the searcher/MEV landscape:

• Flashbots: A research and development organization that created the Flashbots Auction, a private channel for searchers to submit bundles, reducing network spam.
• MEV-Boost: Middleware that allows Ethereum validators to outsource block building to a competitive marketplace of builders.
• Fair Sequencing Services (FSS): Proposed solutions to order transactions fairly, mitigating frontrunning.
• Threshold Encryption: A technique to hide transaction content until a block is built, preventing frontrunning.