[ethresear.ch] [Layer 2] EIL: Trust minimized cross-L2 interop

Interesting design, especially the separation between liquidity provision and actual execution of the user’s calls.

One thing I’m curious about is the market structure that emerges around the XLP fee auction.

If XLPs running their own bundlers consistently have a one-block advantage, wouldn’t that create a structural asymmetry between liquidity providers, even if participation is technically permissionless?

In particular, the reverse Dutch auction seems to assume that competition pushes fees toward the marginal cost of providing liquidity. But if same-block inclusion becomes a significant competitive advantage, the equilibrium fee might also reflect access to blockspace, inventory constraints, and execution priority.

I wonder whether this could eventually concentrate fulfillment among a relatively small number of sophisticated XLPs, even without explicit whitelisting.

Have you considered modeling the XLP competition as a repeated auction with heterogeneous latency and inventory costs?

I’d be interested in how you distinguish permissionless participation from economically competitive participation, particularly under congestion or liquidity shocks.