Opinion: Miners are manipulating Ethereum blocks for DeFi

Editor's Note: This article comes fromCointelegraph Chinese (ID: CointelegraphChina), Author: SHEVCHENKO, reprinted by Odaily with authorization.

Editor's Note: This article comes from

Cointelegraph Chinese (ID: CointelegraphChina)

Cointelegraph Chinese (ID: CointelegraphChina)

, Author: SHEVCHENKO, reprinted by Odaily with authorization.

Some Ethereum (ETH) miners appear to be redesigning blocks for use in DeFi, an example known as Miner Extractable Value (MEV).

Miners’ extractable value has long been anticipated by researchers as a potential DeFi exploit that leverages miners’ unique protocol clout. Since miners have free reign over which transactions to include and in which order, this opens the way for a variety of development techniques for on-chain decentralized finance.

Anonymous researcher Frank Topbottom highlighted several convincing examples of MEVs, and this is likely the first time these activities have been noticed by the public.

He mentioned several cases of suspicious transactions mined by major mining pools such as SparkPool and F2Pool. These are usually initiated by a small subset of addresses and appear first in blocks despite having lower gas fees than others. This behavior cannot immediately be explained by "legal" behavior, such as miner reward distribution. But it's also not clear what the purpose of those deals is.

A more visible example of MEV can be observed in transactions in some small pools, Topbottom citing 2Miners, Minerall Pool and EzilPool, which account for about 2% of the total hashrate.

One of the transactions in question provided several characteristics that point to value extraction by miners. The first clue is that its fee is actually zero - only 2 Wei. This should not be confused with Gwei (billion Wei). Wei is the smallest currency unit of Ethereum, equal to one billionth of Ethereum.

In today's Ethereum market, 2 Gwei may raise enough doubts, but a 2 Wei transaction is simply impossible to confirm. In fact, it was confirmed in just 17 seconds.

The second clue is that the transaction was an arbitrage transaction, with the sender making a profit of about $70 on the $2,800 pledge. At current gas fee levels, such a trade would never be profitable, so existing arbitrage traders ignored the opportunity. While it is unclear who was responsible for the transaction, it would have been nearly impossible to complete without the assistance of miners.

In this case, Topbottom notes, the trade slightly increases market efficiency by balancing prices that other markets cannot. But miners are capable of much more than that.

Since they have the power to reorder transactions at will, miners can get ahead of all non-miners. This can be used to get a head start on arbitrage transactions, auction liquidations and token offerings, among other things.