Ethereum logs $1M MEV block reward amid Curve Finance exploit

July 31, 2023 Coin Telegraph

Ethereum logs M MEV block reward amid Curve Finance exploit

The highest recently generated block reward was 584 ETH, created by a MEV bot front-running transactions during the DeFi chaos.

The recent Curve Finance exploit has reportedly led to one of the largest ever maximal extractable value (MEV) reward blocks of 584.05 Ether (ETH).

On July 31, Ethereum core developer “eric.eth” reported that “today has produced some of the largest MEV reward blocks in Ethereum’s history,” adding it was caused by the exploit of Curve Finance stable pools on July 30.

Data shows a larger MEV reward block of 692 ETH was recorded in March.

“A bot notices an incoming hack in the mempool, reproduces the tx [transaction] and front runs it”, he explained before adding, “To do so they pay the block producer a lot of ETH to be front of the line.”

Today has produced some of the largest MEV reward blocks in Ethereum’s history.

Slot 6,992,273: 584 ETH
Slot 6,993,342: 345 ETH
Slot 6,992,050: 247 ETH
Slot 6,993,346: 51 ETH
— eric.eth (@econoar) July 30, 2023

A MEV bot is designed to generate extra revenue by reordering and/or inserting transactions in an otherwise normal block to generate arbitrage opportunities.

MEV bots can also see pending liquidation transactions and front-run them to buy the liquidated assets first at a discount.

The validator gets to propose a block using a relay that outsources their block production to entities specialized in extracting this extra revenue. They will get a cut of this revenue in exchange for allowing the MEV bot to front-run the transaction.

This is known as the “block reward” and some huge ones have been logged over the past few hours.

The highest MEV bot block reward was 584.05 ETH, valued at around $1 million, confirmed at 1.34 am UTC on July 31, according to Beaconcha.in. There were also block rewards for 345 ETH and 247 ETH around that time.

Moral questions were raised among the responses to the tweet and the implications of potentially illicit funds being used to pay validators to allow the front-running of transactions.

“And this is where the morality of MEV rewards going to miners gets pretty shady. These are effectively hacked funds.”

In April, a Subway-themed trading bot made millions in extractable value by using “sandwich attacks” during the memecoin trading frenzy.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Magazine: Should crypto projects ever negotiate with hackers? Probably

3 reasons why Ethereum’s market cap dominance is on the rise

June 21, 2023 Coin Telegraph

bnb

Bitcoin dominance is rising, but so is Ethereum’s share of market dominance among its altcoin competitors. Cointelegraph explains why.

Ethereum has been the dominant smart contract and decentralized application (Dapp) network since its inception. An analysis based on Ether’s price (ETH), and its market capitalization, shows indisputable evidence that the blockchain has been gaining market share over time.

*Ether market capitalization dominance (%). Source: TradingView*

As shown above, Ether’s dominance in market capitalization terms grew over the past couple of years, from an 18% average in July 2021 to the current 20%. Excluding Bitcoin (BTC) from the analysis, Ether’s market share presently stands at 40.6%, while the next competitor, BNB, holds a 7.2% share.

This shows the disparity from the leading Dapp-focused network to the incumbents, which is also evident when analyzing the total value locked (TVL) on each network’s smart contracts. Ethereum is the absolute leader with $24.6 billion in TVL, followed by Tron’s $5.4 billion and BNB Chain’s $3.3 billion.

*Total value locked market share (%). Source: DefiLlama*

The above chart depicts the Ethereum network’s TVL market share declining from 70.5% in June 2021 to 49.5% in May 2022. The movement happened while Terra and Avalanche gained a combined 20% market share in smart contract deposits. However, after the Terra-Luna ecosystem collapse in May 2022, which culminated with developers halting network activity, Ethereum quickly regained a 58% market share.

Despite the emergence of Dapps on the BNB and Tron blockchains, Ethereum’s leadership has remained unquestioned over the past 12 months. This data shows the irrelevance of the total number of unique active wallets interacting with smart contracts (UAW) per chain.

For instance, according to DappRadar, WAX has 363,600 active users, followed by BNB Chain's 517,300 30-day UAW. These figures are way higher than the Ethereum network’s 66,300 unique active addresses, but they reflect a much lower transaction fee, opening room for manipulation.

Decentralization matters, and Ethereum stands out among its competitors

Ethereum is the ecosystem with the highest number of active developers, surpassing 1,870, which is more than the next three competitors combined: Polkadot (752), Cosmos (511), and Solana (383).

Currently, the Ethereum network has over 700,000 validators, with 99% of the balances locked in staking participating in the process. The 32 ETH threshold limit per validator undoubtedly inflates this number, but Lido, the largest known staking pool, controls 32% of the staking, with Coinbase coming in second with 9.6%.

Consequently, it is safe to say that Ethereum is far less centralized in terms of development and validation in comparison to Tron, BNB Chain and Solana.

Other reasons why Ether’s dominance has been on the rise, even as Bitcoin reached a 50% market share on June 19 are: derivatives activity and Ethereum’s dominance of the NFT market

Derivatives markets are essential to institutional investors

Ether’s future contracts are essential for institutional trading practices like hedging and trading with leverage. Ether’s cash-settled futures were added to the Chicago Mercantile Exchange in February 2021. To date, no other cryptocurrency, apart from Bitcoin, has ever reached the world’s largest derivatives exchange.

In futures markets, longs and shorts are balanced at all times, but having a larger number of active contracts — open interest — allows the participation of institutional investors who require a minimum market size. Ether futures aggregated open interest stands at $5.4 billion, while competitors BNB hold $380 million and Solana a mere $178 million.

Ethereum is still the market leader in NFTs

Nonfungible tokens (NFT) are a perfect example of how cheaper and faster transactions do not always translate to increased adoption. There’s nothing stopping NFT projects from shifting between blockchains, whether for new listings or existing collections. In fact, y00ts and DeGods moved to Polygon earlier in 2023.

Despite facing gas fees that oftentimes break above $10, Ethereum remains the absolute leader in the number of buyers and total sales. According to CryptoSlam!, the leading network reached $380 million in sales in the past 30 days, while Solana, Polygon and BNB Chain totaled a combined $93 million.

Ultimately, the data favors Ethereum versus the competing smart contract-focused blockchains. The positive trend in Ether’s dominance might fade over time if the promised upgrade to allow parallel processing (sharding) does not come to fruition, but for now, Ether’s 20% market capitalization share remains unchallenged.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Vitalik Buterin warns against overloading Ethereum consensus

May 22, 2023 Coin Telegraph

Coin Telegraph

Buterin has advocated preserving Ethereum consensus minimalism and not overloading validators with other things.

Ethereum co-founder Vitalik Buterin has published a lengthy blog post warning of the dangers of “stretching” Ethereum's consensus past its core functions of validating blocks and securing the network.

Ethereum consensus is the process whereby blocks are validated by the proof-of-stake mechanism implemented in September 2022 with “the Merge.”

In a May 21 blog post titled “Don’t overload Ethereum’s consensus,” Buterin warned that using Ethereum’s network consensus for other things could bring “high systemic risks to the ecosystem and should be discouraged and resisted.”

The Ethereum co-founder was essentially promoting the preservation of the blockchain’s minimalism.

Don't overload Ethereum's consensus:https://t.co/07tzyCrZcJ
— vitalik.eth (@VitalikButerin) May 21, 2023

Buterin noted that over the years, a number of proposals or ideas had floated around that suggested using the Ethereum social consensus for other purposes, such as price and data oracles, re-staking initiatives and using layer-1 soft forks to recover layer-2 projects should they have issues.

“There is a natural urge to try to extend the blockchain’s core with more and more functionality because the blockchain’s core has the largest economic weight and the largest community watching it, but each such extension makes the core itself more fragile.”

Buterin said that a certain subset of these techniques could bring “high systemic risks” to the ecosystem, such as bugs or an intentional 51% attack.

Some high-risk examples include creating ETH/USD price oracles in which ETH (ETH) holders or validators can be bribed to vote on, which may result in a “fork out the bad participants' money” if there is disagreement.

However, he acknowledged a need for better oracles, proposing a case-by-case approach because various problems are “inherently so different” from each other.

Overall, Buterin said that any expansion of the “duties” of Ethereum's consensus increases the costs, complexities, and risks of running a validator.

Application-layer projects “taking actions that risk increasing the ‘scope’ of blockchain consensus to anything other than verifying the core Ethereum protocol rules,” should be treated with caution, he said, summarizing:

“We should instead preserve the chain’s minimalism, support uses of re-staking that do not look like slippery slopes to extending the role of Ethereum consensus, and help developers find alternate strategies to achieve their security goals.”

The Ethereum consensus mechanism switched from proof-of-work to proof-of-stake in September last year. Additionally, staked Ethereum has only just been released for withdrawal with the Shapella upgrade on April 12. This explains the increased scrutiny of validator roles and security risks on the world’s largest smart contract network.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Ethereum’s Shapella Upgrade Unlocks Staked Ether, Over 860K ETH Poised for Withdrawal, Price Surges 6%

April 13, 2023 Bitcoin.com

Ethereum’s Shapella Upgrade to Enable Staking Withdrawals Set to Go Live on April 12

April 12, 2023 Bitcoin.com

Less than 1% of staked ETH estimated to sell after Shanghai upgrade: Glassnode

April 12, 2023 Coin Telegraph

Beacon Chain

The analytics firm backed up its prediction, stating only 253 validators have signed up to fully exit their staked Ether position.

An estimated 170,000 Ether (ETH) of the total 18.1 million ETH staked on the Beacon Chain will be unlocked within the first week of the Shanghai hard fork being executed on Ethereum, Glassnode has predicted.

The figure will comprise 100,000 Ether ($190 million) staking rewards and 70,000 ETH in staked Ether ($133 million) hitting the market the on-chain intelligence platform predicted in its April 11 report.

Glassnode backed up its prediction by explaining that only 253 depositors are waiting to exit their stake and that a few mechanisms are in place to prevent a flood of Ether supply from hitting the market all at once.

The highly anticipated Shanghai/Capella hard fork is scheduled to take place on 12-April-2023, enabling the withdrawal of staked #Ethereum.

In this extended edition of the Week On-Chain, we shall evaluate the overall Ethereum staking landscape, develop a framework to establish… pic.twitter.com/EVgsz3s6GG
— glassnode (@glassnode) April 11, 2023

The 253 exiting depositors own a total of 1,229 validators, while another 214 slashed validators will be forced out as soon as Shanghai is activated on Ethereum with Glassnode confident the hard fork will not have a "dramatic" impact on Ether's price action:

“Even in the extreme case where the maximum amount of rewards and stake are withdrawn and sold, the sell-side volume still falls within the range of the average weekly exchange inflow volume.”

“Therefore, we conclude that even the most extreme case will have an acceptable impact on the price of ETH,” the firm added.

Data shared by Glassnode found that only 22% of the 253 exiting depositors are currently in profit too.

*The types of organizations, size, age and profitability of each of the 253 exiting Ethereum validators. Source:* *Glassnode*

Glassnode expects a large amount of Ether to be withdrawn from the crypto exchange Kraken after the legality of its staking services was challenged by the United States Securities and Exchange Commission (SEC).

It also anticipated that crypto lending platform Celsius may withdraw a large amount to sell its staked Ether as part of its bankruptcy proceedings.

However, it is unlikely that Kraken and Celsius will make these withdrawals as soon as Shanghai is activated, it said.

*Approximately 11.2% of the Ether staked on the Beacon Chain is operated by Kraken’s staking service. Source:* *Glassnode*

The average deposit price across all staked ETH is $2,136, down 12.7% from Ether’s current price of $1,865, which equates to a net unrealized loss of $4.7 billion, Glassnode said:

“After the peak unrealized loss of $16B in July 2022, the net unrealized loss now amounts to $4.7B. It is mainly carried by the Whale sized depositors, who hold a 76% share of the unrealized losses.”

Global financial firm Fidelity Investments is also of the view that Shanghai won’t have too much of an impact on Ether's price action.

It explained in an April 5 report that “selling pressure will be muted due to the likelihood of partial withdrawals being re-staked as well as the length of time the withdrawals will take.”

The Shanghai upgrade is set to take effect on April 12, 10:30 pm UTC according to blockchain infrastructure firm Blocknative.

The unlocking of staked Ether will be enabled by Ethereum Improvement Proposal-4895.

Of the five EIPs that will be activated by Shanghai, it is by far the most anticipated one as it will move Ethereum one step closer to a fully functional proof-of-stake system.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Ethereum ‘re-staking’ protocol EigenLayer launches on testnet

April 7, 2023 Coin Telegraph

Coin Telegraph

The re-staking collective aims to address Ethereum validator economic incentives.

A new protocol that allows Ethereum validators and stakers to “re-stake” their assets onto other emerging networks has just launched on testnet.

The mainnet launch of the EigenLayer protocol is not expected until Q3, however, and testing will be phased in three stages to onboard various participants into the ecosystem. The first stage is using Ethereum’s Goerli testing network.

The project has some serious backing and announced $50 million in a Series A funding round in late March led by crypto venture firm Blockchain Capital, along with Coinbase Ventures, Polychain Capital, Electric Capital and Finality Capital Partner.

EigenLayer aims to become a decentralized marketplace for Ethereum node operators and validators to earn fees on additional services. It allows them to restake assets they received in exchange for staking Ether on platforms such as Lido (stETH) and RocketPool (rETH). The assets can be reused to validate and secure other networks, such as sidechains or non-EVM blockchains.

According to the white paper, EigenLayer also has plans to enable restaking for ETH withdrawn from the Beacon Chain following the Shapella upgrade.

“Ethereum validators can set their beacon chain withdrawal credentials to the EigenLayer smart contracts, and opt-in to new modules built on EigenLayer.”

The protocol aims to address issues with validator economic incentives. EigenLayer founder Sreeram Kannan said that facilitating the moving and re-staking of ETH onto other networks would incentivize validators and stakers with additional yields and allow smaller networks to grow securely.

We are excited to announce the release of the testnet for the first stage of the EigenLayer protocol, which supports liquid and native restaking.

Please read the full details here: https://t.co/1eoriZOcwo

1/8 pic.twitter.com/xLs3CC2EOK
— EigenLayer (@eigenlayer) April 6, 2023

In late March, Ethereum co-founder Joseph Lubin said that “[t]he Eigen Labs team is at the forefront of some of the most exciting work happening in Ethereum.”

“Eigenlayer is a new paradigm for fostering protocol-centric innovation through a programmatic, decentralized trust marketplace,” he added. High praise, but it’s worth noting that Lubin’s Ethereal Ventures fund has invested in EigenLayer.

There are currently 17.9 million ETH staked on the Beacon Chain, according to the Ultrasound.Money tracker. At current prices, this is valued at around $33.6 billion, which is more than the entire market capitalization of USDC. It represents almost 15% of the entire Ethereum supply.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Validators