Ever wondered how auctions work in the Ethereum ecosystem?

It's a fascinating process that's more complex than you might think.

Let's dive into this world of block space auctions and liquidations

THREAD 🧵

Block Space Auctions The Competitive Heart of Ethereum 🔥

First off, auctions are already a big part of Ethereum. They happen on various levels, with block space auctions being a key example. It's a competitive space where everyone wants their transaction included first.

The Trigger How Auctions Begin ⚙️

So, how does an auction start? It all begins with an update. This update can trigger a liquidation, which is where the competition really heats up. Everyone is racing to be the first to liquidate.

Chainlink Updates The Race Is On 🚀

Imagine a situation where Chainlink updates. This can potentially enable a liquidation. As soon as the update is noticed, the race is on. Everyone is now in competition to get their transaction included first.

The Rewards of Winning High-Stakes Competition 💰

Let's say there's a reward of 100,000 up for grabs. Participants in this auction are willing to bid up to 99.9% of that reward. Why? To ensure their transaction gets included first. It's a high-stakes game.

Bidding Against Block Builders 🛠️

But who are they bidding against? They're not bidding against each other, but against block builders. These are the ones who have the power to include transactions in the block. The higher the bid, the more likely it is to be included.

Overpaying in the Race to the Top 🏁

So, in essence, these auctions are a race against time and against each other. The goal? To have your transaction included first. The problem? Dapps are overpaying and that's an understatement. It just became ridiculous.

@API3DAO