Describe how Osmosis ProtoRev captures the MEV revenue owned by the protocol
Explain how Osmosis ProtoRev captures protocol's MEV revenue.
Blockingradigm researcher Dan Robinson believes that one of the most notable use cases for Uniswap v4 Hooks is AMM MEV capture. The co-founder of Stride Labs sees similarities between this feature and Osmosis’ ProtoRev functionality and compares the differences between the two.
When users swap on Osmosis, the price of a token in one pool may deviate from the price in another pool. ProtoRev “backruns” user transactions to capture MEV and rebalance token prices across pools.
How is ProtoRev different from Uniswap v4’s Hooks? In many ways, they are similar. Theoretically, Hooks should allow Uniswap v4 to internalize some of its MEV, just like ProtoRev. However, there are some key differences: 1. Calculating backrun routes on the Ethereum mainnet is very gas-intensive; 2. Hooks’ sorting guarantees are weaker than ProtoRev’s; 3. Hooks’ flash loans are expensive, but ProtoRev’s are basically free.
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ProtoRev’s highlights: fully on-chain arbitrage; executed after successful trades and prioritized over other trades; captures and redistributes MEV, with over $67,000 captured since March. ProtoRev’s impact on users: MEV that was previously extractable by external parties is now extracted by Osmosis; ProtoRev’s trades occur after user trades and have no negative impact on them; balances token prices across pools, providing better trade execution for users.