Felix (@felixvoo) • Hey
Just a himbo who doesn't really understand crypto.
- MEV Series Part I: Blockspace Markets Across Ecosystems
Natalie Mullins writes that until this point, the MEV conversation had been focused on Ethereum, nearly exclusively. By further exploring MEV within the Solana and cosmos ecosystems, this article highlights a range of approaches to address MEV and the associated incentive alignment challenges including a comparitve analysis of tradeoffs.
The article argues that MEV is an important topic with implications for centralization, network performance, and more, and that the technical solutions designed will be guided by political questions related to stakeholders, governance, centralization, censorship risk, and wealth redistribution. The article also frames the discussion as a political analysis of MEV and emerging blockspace market structures.
*I’ve included a Chat GPT (lol) generated summary of the last few points that Natalie goes into:*
- Proposer-builder separation (PBS) has spread beyond Ethereum to Solana and Cosmos.
- Jito Labs takes a very latency-sensitive approach to MEV extraction because of Solana's network architecture, which could be useful for those running servers and/or validators outside of well-connected areas. However, using latency as a vector for MEV extraction could come with decentralization and incentive alignment issues.
- Cosmos communities have sovereignty and autonomy over their tech stack, making it easier to enshrine MEV solutions like PBS into the core protocol. Cosmos governance is challenging but can take place on-chain, accelerating the implementation process. Innovations such as ABCI++ allow Cosmos-based applications to communicate directly with the consensus layer, allowing for new features like threshold encryption.
- Incentives to capture cross-domain MEV are expected to increase and pose a threat to the economic security models of various ecosystems. Cosmos was built for cross-chain from the start and may be uniquely exposed to the centralizing forces of cross-domain MEV. Large entities already run validators on multiple Cosmos chains, which could lead to a world where only a few well-capitalized validators control significant stake across various chains.
I had the chance to read the Eigenlayer white paper that details Eigenlayer as a staking collective, which imposes additional slashing on consensus layer Ether stakers such that firms/entities can validate new software modules built on top of the Ethereum ecosystem.
Personally what I had initially gravitated toward the Eigenlayer solution, was the use of Eigenlayer to solve the data availability problem within the Ethereum ecosystem which refers to the challenge of verifying that the data for a newly produced block is available. The security of Ethereum relies on the assumption that full nodes have access to block data. If a block is proposed without all the data being available, it could contain invalid transactions and compromise the network's functionality.
An example of Eigenlayer being used in this way would be if one could stake their Ethereum that imposed some additional slashing conditions, where I promise to make data of all blocks available. This *could* mean that if one didn’t make those block available their staked Ether could be slashed, and could then offload the resource intensive activity of making this data available for all full nodes that might require it.
There's more in the whitepaper, and even Messari wrote about this too, so you could check that out here.
Starting off with a quote from one of the articles above, from the Oasis blog.
*On 21st February 2023, we received an order from the High Court of England and Wales to take all necessary steps that would result in the retrieval of certain assets involved with the wallet address associated with the Wormhole Exploit on the 2nd February 2022. This was carried out in accordance with the requirements of the court order, as required by law, using the Oasis Multisig and a court authorised third party*
Dan from Blockworks Research goes into more detail about this in the third link with regard to this.
Around $225 million dollars worth of assets (120.69k wstETH and 3.21k rETH) seem to have been recovered from the Wormhole Exploit that occurred a year ago. They accomplished this by “counter exploiting” an upgradable proxy contract on the Oasis protocol, securing the stolen funds and transferring them to a different wallet. The Wormhole hacker had been moving the stolen funds through various Dapps on Ethereum and recently held 2 Oasis vaults.
Between Jan 23 and Feb 16, the hacker used the vaults to borrow DAI and open a leveraged long with Ethereum staking derivatives drawing a total of $78M DAI debt against $220M of collateral.
I think it’s best to read the article that Dan Smith has written with regard to the mechanics of the counter exploit. For simplicity’s sake I’ve also linked the tweet to the explanation of this below:
**It should be noted, that the counter exploit was only possible with the approval of the Oasis Multisig, and does not mean that there is an active vulnerability to current automated vault users.**