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Flashbots is a research and development organization formed to mitigate the negative externalities and existential risks posed by MEV. They aim to Democratize MEV Extraction through MEV-Geth, which enables a sealed-bid block space auction mechanism for communicating transaction order preference.
Flashbots created an ETH node for miners, that not only watches the mempool like any other node, but also connects to a relayer (a server) operated by Flashbots. This MEV-Relay is a kind of parallel channel that directly connects miners to bots that want their transactions included.
The transactions that the bots want to include are sent through the MEV-Relay as bundles containing:
- the transactions to execute
- a tip to the miner, coming as an ETH transfer
These transactions use a 0 gwei gas price, as the payment to the miner is included in the transaction itself as the tip.
Since these transactions are sent through a parallel private relay, it reduces the mempool bidding war, failed transactions bloating the blockchain, and overall gas cost for users.