I see that Flashbots is coming up on the TL today because of this tweet, but most people don't know what it is or what MEV is.
So here come a quick thread to explain in simple terms.
tl;dr: bots send txs to miners directly, which reduces overall gas cost. https://twitter.com/thegostep/status/1381241040351412224?s=20

In their own words: "Flashbots is a research and development organization formed to mitigate the negative externalities and existential risks posed by miner-extractable value (MEV)"
I start with that because at first I thought "Flashbots" were a type of bot :/

So in other words, they develop stuff to reduce gas cost and some other issues that come from the activity of arbitrage bots on chain.
One of the things that raises gas cost is that bots compete between each other to have the same tx included first on the blockchain.

If multiple bots detect an arbitrage between pools, they will craft the same tx, send it to the mempool, but then detect that other bots are on it too and start raising the gas price on their tx to be included first, like in an auction.

The only limit to the price they are willing to pay for their tx is the profitability of the arbitrage. So a bot detecting a 10K$ profit on an arb could raise its gas price to something stupid like 50 000Gwei, as long as the tx costs less than 10K$.

This is simplified, but you get the idea. Miners profiting from this is called MEV because the miners get a fat fee from this gas bidding war. But the problem for normal users is that it leads to overpriced txs being included preferentially and higher gas cost overall.

You can see how much this represent with Flashbots dashboard https://explore.flashbots.net/  We're talking about 45.6M$ of extracted value in 30 days, 7.4M$ of gas in failed txs alone since Jan 1.

So Flashbots created an Eth node for miners, that not only watches the mempool like any other node, but also connects to a relayer (a server) operated by Flashbots. This MEV-Relay is a kind of parallel channel that directly connects miners to bots that want their tx included.

The txs that the bots want to include are sent through the MEV-Relay as bundles containing:
- the txs to execute
- a tip to the miner, coming as an ETH transfer
And the txs use a 0gwei gas price, as the payment to the miner is included in the tx itself as the tip.

An example of such a tx:
https://etherscan.io/tx/0x36712b089e2743088b8499c77847412e54cd58da2a81bd6aca9915eaceeb393e
As you can see, Gas price = 0, but the last action is a transfer of 68ETH to F2Pool.
(BTW this tx is a liquidity sniper getting trapped, read about it here: https://twitter.com/SiegeRhino2/status/1381035640989626369)

Since these txs are sent through a parralel private relay, it reduces the mempool bidding war, failed txs bloating the blockchain, and overall gas cost for users.
If you're interested, you can read more about it here : https://github.com/flashbots/pm