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Time Moves Faster When There is Nothing You Anticipate: The Role of Time in MEV Rewards


Öz, Burak; Kraner, Benjamin; Vallarano, Nicolo; Kruger, Bingle Stegmann; Matthes, Florian; Tessone, Claudio J (2023). Time Moves Faster When There is Nothing You Anticipate: The Role of Time in MEV Rewards. In: CCS '23: ACM SIGSAC Conference on Computer and Communications Security, Copenhagen, Denmark, 30 November 2023. ACM Digital library, 1-8.

Abstract

We present a novel analysis of a competitive dynamic present on Ethereum known as "waiting games", where validators can use their distinct monopoly position in their assigned slots to delay block proposals in order to optimize returns through Maximal Extractable Value (MEV) payments, a type of incentive outside the Proof-of-Stake incentive scheme. However, this strategy risks block exclusion due to missed slots or potential orphaning. Our analysis reveals evidence that, although there are substantial incentives to undertaking the risks, validators are not capitalizing on waiting games, leaving potential profits unrealized. Moreover, we present an agent-based model to test the eventual consensus disruption caused by waiting games under different settings, arguing that such disruption only occurs with significant delay strategies. Ultimately, this research provides in-depth insights into Ethereum's waiting games, illuminating the trade-offs and potential profit opportunities for validators in this evolving blockchain landscape.

Abstract

We present a novel analysis of a competitive dynamic present on Ethereum known as "waiting games", where validators can use their distinct monopoly position in their assigned slots to delay block proposals in order to optimize returns through Maximal Extractable Value (MEV) payments, a type of incentive outside the Proof-of-Stake incentive scheme. However, this strategy risks block exclusion due to missed slots or potential orphaning. Our analysis reveals evidence that, although there are substantial incentives to undertaking the risks, validators are not capitalizing on waiting games, leaving potential profits unrealized. Moreover, we present an agent-based model to test the eventual consensus disruption caused by waiting games under different settings, arguing that such disruption only occurs with significant delay strategies. Ultimately, this research provides in-depth insights into Ethereum's waiting games, illuminating the trade-offs and potential profit opportunities for validators in this evolving blockchain landscape.

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Additional indexing

Item Type:Conference or Workshop Item (Paper), not_refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Informatics
Dewey Decimal Classification:000 Computer science, knowledge & systems
Scopus Subject Areas:Physical Sciences > Computer Networks and Communications
Social Sciences & Humanities > Finance
Physical Sciences > Electrical and Electronic Engineering
Physical Sciences > Safety, Risk, Reliability and Quality
Scope:Discipline-based scholarship (basic research)
Language:English
Event End Date:30 November 2023
Deposited On:19 Feb 2024 11:20
Last Modified:31 Mar 2024 01:40
Publisher:ACM Digital library
Series Name:DeFi: Proceedings of the Workshop on Decentralized Finance and Security
ISBN:979-8-4007-0261-7
OA Status:Green
Publisher DOI:https://doi.org/10.1145/3605768.3623563
  • Content: Accepted Version
  • Language: English