I’m Kam from Chorus One, and we’ll be one of the genesis validators on dYdX v4. Two members of our research team at Chorus One recently published an extensive paper on MEV in dYdX v4. You can access the article here.
With dYdX transitioning to a sovereign chain secured by a diversified validator set, and given the substantial daily trading volume that is happening on dYdX, there is indeed a risk of malicious validators using their position to extract value through MEV.
Introducing a social slashing mechanism is a great step, as it is currently the most practical way to assess validator behaviors. The introduction of a committee actively addressing this issue is a significant positive development, and I’m looking forward to seeing how this will work over time. The beauty of blockchain is also that anyone can check validator behavior on-chain thanks to tools like what the Skip team developed, but having a committee dedicated to that endeavor is important to take clear actions.
dYdX stakers will be the very first line of protection, as they should stake with trustworthy validators to maintain a healthy validator set, with the Committee serving as a secondary defense when evidence of suspicious behavior emerges. The amount asked seems very fair considering how valuable dYdX is.
In our research article, our team demonstrated that the combination of a slashing penalty and the waiving of the unbonding period for re-delegation to a good actor are effective ways of addressing undesirable validator-driven MEV. The combination of these measures helps mitigate the risks associated with MEV extraction by validators.
The main challenge for the Committee would be to understand if a validator is a false positive or not, because discrepancies can arise due to different factors. For example, some validators may have their own data centers or dedicated servers, leading to better latency performance compared to other validators. Another example is network instability, which can also result in discrepancies between validators. Overall, I’m confident that with such an experienced and reputable Committee, they will be able to clearly assess such situations.
We’re very pleased to see discussions of this nature starting as they are very important for the success of the dYdX chain