Interview with jaredfromsubway

Hi everyone, welcome to the Crypticwoods. We are a new organization dedicated to illuminating the Dark Forest that is MEV. We hope to give the wider community a better understanding of how it works and how you can use that knowledge to aid you in your crypto journey. Our first product, the libMEV dashboard is now live; please check it out for accurate up to date MEV data.

Full disclosure, jaredfromsubway has since given a grant to crypticwoods.eth.

Transcript

CW - Today we have an extremely illustrious guest with us - we have "jarry", a representative from jaredfromsubway.eth - the current king of Ethereum MEV. Thanks so much for accepting this interview request. I know you are building sandwiches full-time.

JARRY - No problem, just had to take a moment out of the sandwich shop.

CW - First of all I just wanted to say, it is very hard to reach you. Do you guys have any socials for people to contact?

JARRY - We have no public social media accounts, anyone claiming to be Jared is fake, and there’s quite a lot on Twitter.

CW - Yea, I assumed so. Given your private nature, what made you decide to do this interview with us?

JARRY - I had a look at your product and it was great. It’s the first dashboard for MEV specifically that I’ve seen that looked accurate in terms of atomic profit. On top of that, if I were to do an interview of any kind, it would only be with someone familiar with MEV like yourself. Funny enough, when I first started, I used your subway repo to understand how it all worked, and it even ended up helping draw inspiration for the name -- so giving a short interview is the least I could do in return.

CW - Thanks! We’ll loop again back to the dashboard later in the interview, but first, just to just so that you know listeners not so familiar with MEV have a bit of an idea, what is MEV in your words? What is it that you do? What are these eponymous sandwiches?

JARRY - MEV is basically the extraction of value from the inefficiencies in the market, whether it be from price discrepancies or user tolerance. On ethereum this is done generally by searching for value through ordering transactions in such a way to maximize the value captured by both yourself and by the network.

CW - Okay. And then what is a sandwich in this context?

JARRY - A sandwich can occur when a user sets a price tolerance that is significantly higher than the current market price. As such, you can order transactions by first buying from a pair, and then selling after the user makes their trade. To give an analogy of something similar in traditional markets is Taylor Swift tickets. Some people will post on a marketplace that they are willing to buy them for $10,000 as an example, even though their retail price is only $5,000. I’m sure it's easy to grasp there’s plenty of value to be had by being fast to buy them at $5,000 and unload them for $10,000.

CW - A lot of people think sandwiching is unethical, some people equate it to front running in traditional finance. What is your opinion of this?

JARRY - So I can see why people think front running in traditional finance is unethical, but I think it would only be considered unethical if you have privileged or inside information. But if you are just working off the publicly available information such as the mempool, (or e.g., news events in traditional markets) I think it's fair game.

With regards to users who are mad about being sandwiched, to quote Thomas Jefferson, "the price of freedom is eternal vigilance". The ethereum community is trying to build a decentralized environment to empower users with financial freedom, but the cost of this is that people need to be responsible for their own actions. A sandwich is only possible when the user sets a slippage that allows for this kind of arbitrage. Given its a publicly expressed preference, if the user got a price they are not happy with, they should take responsibility for their own actions, and realize the mistake is for setting such a price to begin with.

As another example, during peak demand, Uber has a surge pricing model, where users can choose to either wait, or pay the premium price. Most sandwiching occurs when a new token launches, and there's peak demand for the token. Many users are willing to pay this premium over market rate to be early, and by being sandwiched, the vast majority of their value lost is used by searchers to pay validators a tip to include them in the block early. You can see it as user’s are paying a premium for the luxury of riding the express subway to Valhalla.

So yea, given this, and that searchers don’t do anything to mislead or deceive users, I don't agree it is unethical, but I can see why it may seem controversial.

CW - Hmm okay. Yeah. So for the sandwiching, your analogy with Uber is interesting, but some would argue that without your presence or without the presence of any sandwiches, the user would get a better price. But the presence of sandwiches now forces users into getting the worst price they would accept, hurting the overall ecosystem. What do you think about that?

JARRY - I think it's very naive to assume that if a user chooses a price preference that leaves value for arbitrageurs, no one will come and take advantage of such an opportunity. Suppose a random drunk person stumbles into a poker game; there is always going to be someone there to capture this value, and it's hard to argue this hurts the poker community. Moreover, as in the poker analogy, generally, the user is there to make money themselves, by buying before others and selling at a higher price.

I agree that without the presence of sandwiches, the user does get a better price, but, it’s not like it's impossible to make a trade without getting sandwiched. You can simply set a low slippage tolerance to not allow for this value, or use a private RPC, and there are plenty of tools on the market for this.

Furthermore, something that is often overlooked is that in order to be successful in MEV, you need to gain a very deep understanding of the EVM, and this research has plenty of positive externalities. Take YannickCrypto for example, he used to run one of the best sandwich shops, and with those skills, has managed to perform plenty of whitehat operations on protocols saving user funds, something unlikely to have happened if MEV did not exist.

CW - That’s a very interesting point about positive externalities. I saw Yannick’s recent twitter post of performing a whitehat operation on a MEV contract, but wasn’t aware he helped save money for protocols as well. How about I now bring this away from the users and back to the searcher side. So this is an extremely competitive environment. So like you said, you know, everything is public and there's a lot of people gunning for the same opportunities. So what have you guys done differently that has led to you being so successful?

JARRY - Asides from extreme autism, I guess one thing we've done differently is instead of treating MEV as a pure computer science problem of atomic arbitrage, we added more of a perspective of speculation. Crypto is a very new market, with very asymmetric payoffs, so we spent a lot of time delving into the non-atomic strategies.

To put this into context, from my understanding, the most profitable trade in recent history was the guy that bought a few thousand dollars of Shiba and sold it for billions. This was much more lucrative than the profits captured by even the most competent and capitalized market marketers. So taking inspiration from this we've decided to focus a lot more energy into non-atomic value capture.

CW - That’s very interesting that you say that because you know, we noticed that you guys did very well during meme coin season and popularized holding inventory on coins like Pepe. How was your system able to identify tokens such as Pepe as a likely strong meme coin?

JARRY - Without going into too much detail for obvious reasons, we’ve focused a lot of our efforts into predictive models, by using things such as machine learning or sentiment analysis to gain an edge on the speculation front. From this, our model suggested Pepe to have big potential.

CW - Okay sure, interesting. So what are your bags? I know you hold a lot of Pepe. Are there any other tokens you’re big believers of? How do you view the future of meme coins?

JARRY - Overall, we’re just very long crypto. Aside from this, I’m obviously a memecoin enthusiast. To quote the great Elon, "He who controls the memes, controls the universe". Memes are a cultural phenomenon that highlight the way the culture is moving at a particular time in history. And now on the blockchain, we're now able to create memes in the digital space and speculate on their value. So yea, I’m bullish on memes and try to collect as many as possible.

With regards to ETH, we’re also super bullish, to the point we have kept our profits in mostly eth, and only cash out the bare minimum to survive even if it means living off two minute noodles the last 6 months while waiting for the bull.

CW - Oh wow that’s real dedication to the craft right there. Well on the topic of memes you guys have become a bit of a meme yourself, you know, since purchasing the jaredfromsubway.eth ENS you guys have become probably the most well-known searcher out there. Why did you choose that name?

JARRY - Actually it’s a funny story, when I just got into MEV, I was out drinking with our normie friend unfamiliar with crypto. He asked us what I was working on and I told him I was making sandwiches in the metaverse. Without understanding much about eth, and thinking it was more a game, he asked us what our character’s name was. This made us laugh and realize a "screen name" was needed. With only remembering the subway ads, he suggested Jared and I thought it was funny and it stuck. Unfortunately, I didn’t know about the whole pedo side of it lol, and actually only found out from crypto twitter a couple months later -- but by then, it was decided the meme was already born, and since we're so bullish memes we decided to stick with it.

CW - That’s hilarious. But do you feel like that has potentially drawn a bit of a target on your back? There have been a lot of attacks on MEV searchers.

JARRY - I think it doesn't change much in terms of attacks, as long as you’re successful people will always be looking for ways to attack you whether you have an ENS or not. For the culture, we thought to give our contract a bit more personality would be entertaining.

CW - Okay. And I guess on that topic of you know, personifying and bringing the Jared team alive. Are there any details you could share about your team? How large are you?

JARRY - All I can say is we're just a small team. Anywhere between 1 and 10,000 people.

CW - Okay I see. One achievement you guys recently had I’m sure you're aware of, is you are now the biggest gas spenders of all time, more than even Binance.

JARRY - Yea it's a bit surreal. I never expected to be able to pull this off when I just started, and am just happy I managed to contribute so much to the economic security of ethereum, with a little leftover profits of course.

CW - A lot of people view MEV as riskless, but from our dashboard, we can see there are plenty of losers. What are your thoughts on the risks associated?

JARRY - Yeah, that's definitely one misconception that people have with MEV, since the vast majority of trades are profitable, but there's definitely risk, and if you get into this game, you have to accept that whatever money you put in your contract could be drained at any moment, whether it be a mistake from a bug on your part, or something outside your control.

CW - Yes, there’s been plenty of attacks targeting MEV contracts, what are your thoughts on the ethics of this?

JARRY - Well there's definitely no clear line, and many kinds of attacks. Some are vague, such as salmonella, where you can argue the searcher was "outplayed" by another searcher, but others such as the low carb crusader attack was more clearly a hack, as it definitely broke the rules of the game searchers play.

CW - Yea the low carb crusader must have been a frightening experience. How did you guys manage to avoid it, and what was it like that day?

JARRY - So we only managed to avoid the low carb crusader attack by the skin of our teeth. We got very lucky that a few days before we added some safety checks and random optimizations, that let us avoid it. Had it occurred just a few days earlier, I’m not sure we would have survived, and am still unsure whether it was from the recent updates we made, or we were just randomly spared. It was also a very eye-opening experience and a big wake up call that made us realize even the safest contracts can get hacked for everything at any given time. As I’m sure you're aware, some of our competitors lost 8 figures, and I’m sure they would have had very careful risk management.

CW - Yeah that’s wild, any other crazy stories from searching?

JARRY - Haha yea, there was one day, a competitor accidently sent our contract ~$1.5M. I was monitoring the bot and just randomly saw the contract was up almost $2M, but unsure how. Upon further investigation, I realized that a competitor had just fat fingered their entire bankroll to us, and didn’t know what to do. You wouldn’t think someone accidentally sending you money would end up as one of the most stressful days of our searching experience.

It was really quite an emotional rollercoaster. My first instinct was this is too insane to be real, and thought it must be some kind of extremely elaborate phishing attempt, but after doing all kinds of overly paranoid checks, I realized the guy genuinely did misclicked off his roll. Then, being human, as you can imagine, the greed sets in, and you do a lot of mental gymnastics and try to justify why you deserve to and should keep the money, but fortunately after a couple hours of hesitation, we were able to overcome this greed, and ended up deciding the right thing to do was to return the money.

CW - Wow, only in crypto right? Anyway, back to libMEV, I understand you guys have had plenty of time to play with our platform, what are your thoughts on it? Do you have any feedback?

JARRY - Yea it looks great, I especially loved the idea of gamifying searching a bit more with the ELO badges like in esports, but more importantly, the data all seems fairly accurate. It was quite frustrating in the past with so much misinformation. I can understand influencers without knowing any better and blindly trusting a website, but seeing a lot of "experts" publishing ridiculous numbers of MEV profits when it's so easily verifiably false was very annoying.

I feel like if you are to make a website for information, there should definitely be a burden of responsibility for accurate data. Without this due diligence, it's extremely bad for the space and hard to see how you shouldn’t be considered a bad actor. Imagine in traditional finance, and there is an emerging market, but data on these markets was all inaccurate whether it be intentional or from negligence. It would be very hard for an investor or outsider to justify entering the market, as it would be too chaotic. Your dashboard seems to be the first of its kind for MEV that seemed to have handled this side well, and I definitely think something like this would be beneficial for the space as a whole.

In terms of feedback, one thing I hope you guys implement in the future is more historic data. I noticed that you guys have only scraped all the data since the merge. It'll be very interesting for people to look back from the start of DeFi when profit margins were higher and eth was a proof of work system to see how it has evolved. I’ve always found it fascinating to look at things in the lens of history and the different eras.

CW - Could you elaborate on the damage of this misinformation? It’s obvious how fictitious data on financial instruments can be detrimental, but how would something like searcher profits be harmful to crypto? Also, any names you wanted to mention about bad actors?

JARRY - Nah, not here to call anyone out, but I think it's just a principle, that proper due diligence is something anyone that acts as a public news source should ensure. I understand providing data on MEV profits is very niche, but for example, by massively misrepresenting searcher profits as a "trusted source", it would allow us, or anyone in the space, to easily dupe investors by selling equity or raising funds at an exorbitant markup with very one sided information. There’s plenty of reasons why healthy markets should be fair and transparent.

Moreover, traditional news outlets without expertise rely on data from crypto native sources for the most part. If they published an article about crypto, based on "trusted" sources, only to find out it was invalid and have to correct themselves, they harm their own reputation, and would be reluctant to publish stories about crypto in general in the future.

A more common example of bad data that is detrimental for the space is the misreporting of trade volume for exchanges. Unfortunately for this data, it's not publicly available on the blockchain and relies on self reporting, but you can see sites like CoinGecko understand the negative impact and try to combat this with measures such as "Trust Scores".

CW - Yeah that's a good point. I’m actually up to my last question which is how do you guys see MEV evolving in the future? We've seen many iterations throughout the history of MEV, starting with PGA wars, flashbots, now we've got PBS and maybe enshrined PBS in the future. How do you see things evolving and how are you preparing for it?

JARRY - It's hard to say at the moment. I’m unsure where it will go, but with any market, it’s fair to assume there will always be inefficiencies, and hopefully we can adapt with the market to capture whatever opportunities present themselves in the future. It's always a game of cat and mouse between current strategies fading out and new strategies being found, and that's what I’m here for, for the glory of the battle.

CW - Thanks so much for your time. Do you have any parting words for those still with us?

JARRY - To repeat my favorite quote from degen spartan "Your biggest risk is being underexposed to the industry you login to every single damn day to talk about, you know it's gonna go up again eventually."

Buy pepe and stay safe, it's a dark forest out there.