This whitepaper/originating information accuracy is in no way endorsed by Curious Cosmonaut Research. This paper’s content was aggregated from their website here on 1/31/2023 as part of a series to make content more accessible from one place in Cosmos.

Skip - What it is & How it Works 🧐

⚡️ Intro

💡 Skip is building cross-chain transaction execution products for the Cosmos ecosystem to amplify the benefits of MEV for the Cosmos community while reducing its harms.

We’re working closely with Cosmos ecosystem leaders to ensure our product maximally benefits the Cosmos community. Specifically, we’re designing our infrastructure to:

1. Increase the block rewards Cosmos validators and stakers earn by introducing payment for prioritization, which will increase Cosmos’s network security, TVL, and competitiveness
2. Protect the user experience for ordinary Cosmos users by preventing gas wars and censoring toxic forms of MEV, like sandwich attacks on public DEXes
3. Defend validators from spamming and other DDoS vulnerabilities that have recently affected other chains

🏃‍♀️ MEV on Cosmos Today: Speed and Spam

Cosmos chains like Juno, Terra, Osmosis, and Cronos currently have a first-come-first-serve mempool. This means to win arbitrage opportunities, searchers try to locate their arbitrage bots as close to as many validators and full nodes as possible and spam them with transactions.

These strategies create numerous negative externalities for the chain:

1. Execution Risk: In periods of high chain congestion, there’s no way to express that certain transactions are “more important” or more economically valuable for the trader or for the ecosystem. This happened extensively during the 5/9 Terra depeg.
2. Wasted block space and gas: You can find a graveyard of multiple failed transactions behind  large arbitrage opportunities (e.g. see Terra Classic block 5635240) from the rush to be first.
3. Centralization of profits: Almost all arbitrage opportunities are won by a very few addresses, likely controlled by a couple HFT shops that can afford the massive low-latency infrastructure required to win the race. This amounts to a hidden tax on Cosmos users and validators who create these arb opportunities but can’t capture them.
4. Consolidation of participants: MEV searchers and validators are incentivized to vertically integrate to get their bots and nodes on the same servers for faster mempool access and transaction broadcasting. (e.g. We’ve seen partnership progress between MEV-searchers and validators for preferential access), which undermines longterm decentralization.
5. Chain halting risk: Large waves of spam can knock out full nodes or validators (when they expose ports), as has happened recently on other layer 1’s (e.g. Solana)

Each of these externalities scales with transaction volume as Cosmos grows (as the experiences of other chains demonstrate).

(It’s important to note that today, validators are also incentivized to censor, reshuffle, or inject their own transactions to capture MEV. As long as a validator proposes a valid set of transactions, it will be committed).

🚀 Our solution

We’re building a sealed-bid closed auction system that allows traders to submit tipped transactions to validators who prioritize them at the top of blocks based off blocks:

1. The transactions submitted through our relay are inserted above ordinary transactions (submitted through traditional RPC endpoints). Validators receive the tips for the transactions they include in blocks.
2. When different traders submit conflicting transactions, we forward the transaction with the highest tip along to validators. The transactions that lose the auction or would otherwise fail aren’t added to blocks, saving block space for ordinary users.
3. The tips and transactions submitted by traders whose transactions don’t win the auction won’t be visible to other traders or validators

For traders, we provide a simple SDK to submit transactions to our relay:

client.submitBundle(txs, ...)

We will revoke access to the sentinel for:

1. Validators who appear to be censoring or reordering transactions to steal arbitrage opportunities from traders
2. Traders who attempt to DDoS the sentinel

💰 Validator Value Proposition: Higher Earnings

Validators will continue to run their current infrastructure with a new validator client that enables them to accept payment for transaction ordering from searchers. This means:

1. Validators will earn more per block from the tips paid by MEV-searchers, which could be shared with delegators. (In the sealed-bid closed auction transaction protocol on Eth, Flashbots, traders pay validators 95% of the value of their arbitrages as tips.)
2. Skip protects validators from spam through the Sentinel, which provides a high-availability interface for traders to submit tipped-transactions. This enables validators to receive tipped transactions from traders without exposing their ports to the public.

🌱 Ecosystem Value Proposition: Growth & Stability

The long term growth of Cosmos will be dependent on the rewards it can sustainably provide to its participants. Our protocol strongly adds to this goal in two ways:

1. Base yields for validators, stakers, and protocols that depend on them will experience a stepwise increase as MEV profits are distributed to validators and stakers, attracting more liquidity and users into the ecosystem.
2. Longterm chain halt risk will decrease as the incentive for bot spam decreases
3. New businesses and arbitrage opportunities will be unlocked as traders can execute more sophisticated arbitrage strategies and lower financial downside for missing arb ops.

⏱ Current Status

1. Deployment status: Skip is currently live on various chains (see skip.money/dashboard). For any validators wishing to participate and test Skip in a no-risk environment, please contact us on our website.
2. Alignment:  We’re building Skip in collaboration with partners that have long-term alignment with ecosystem partners at different chains (e.g. Cosmos core team, Juno, Osmosis, Evmos), pursuing grants and investments to reduce adoption and platform risk.
3. Design partners: We’re ****onboarding validators and staking protocols as design partners. We’re currently developing partnerships with Blockdaemon, Figment, TerranOne, and 80+ other community-oriented validators

🤝 How to get Involved

<aside> 🎉 There’s many ways to get involved in Skip!

</aside>

1. Validators: you can test and integrate with Skip easily via the website at registration
2. Searchers: check out our Skip Documentation to get set up for top-of-block execution and simulation.
3. Researchers: please reach out to us on our ************website to apply for a research grant!
4. Users: Feel free to use Skip’s endpoints to submit transactions (see here: Skip Documentation) to submit transactions with full privacy, frontrunning-protection, and gas refunds.

Contact us!

• Feel free to send us a shout on our Site 🗣
• You can also join the Discord 🤝
• You can follow us on our Twitter for more updates 🕊