MEV-boost relay

Ethereum validator cashes in 689 ETH from MEV-Boost relay

The 689 Ether, worth nearly $1.3 million, is the largest reward received since the 691 Ether reward paid to Lido on March 20.

A 689 Ether (ETH) reward worth $1.28 million has been paid from a single Maximal Extractable Value (MEV)-boost relay block on the Ethereum Beacon Chain in one of the largest rewards in recent months.

Ethereum liquid staking solution Lido was paid the reward from block number 17007842 on the Beacon Chain, which was finalized on April 9, containing 47 transactions, and built by beaverbuild.org, according to transaction data.

The reward almost matched Lido’s most recent high of 691 Ether on March 20.

The figure raised the eyebrows of Martin Köppelmann, the co-founder and CEO of Ethereum-based infrastructure platform Gnosis, who suggested Ethereum users should use a service like MEV Blocker to prevent their transactions from being exploited.

According to MEV Blocker, MEV bots have extracted more than $1.38 billion from Ethereum users attempting to trade, provide liquidity and mint nonfungible tokens (NFTs).

These centralized MEV-boost relays are able to extract value by aggregating blocks from multiple builders to select the one with the highest fees.

One of the most common MEV exploits is the “sandwich” attack, which occurs when an attacker places a large trade on either side of a target’s transaction, manipulating the price and profiting from the price change.

Related: ETH staking on top exchanges contributes to Ethereum censorship: Data

MEV-boost relays stem from the concept of proposer-builder separation, which was introduced by the Ethereum research organization Flashbots in 2021 in the lead-up to Ethereum’s transition to proof-of-stake in September 2022.

Separating the role of proposers from block builders is intended to promote more competition at the consensus level, further decentralize the Ethereum network and strengthen censorship resistance.

However, Ethereum has encountered several censorship issues since the Merge took place, namely compliance with standards laid down by the Office of Foreign Assets Control (OFAC), although the number of compliant blocks has since fallen.

There are currently 10 active relays, with Flashbots responsible for relaying more than 50% of the MEV-boost blocks since MEV was introduced in 2021, according to MEVBoost.org.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

45% of ETH validators now complying with US sanctions — Labrys CEO

Labrys CEO Lachlan Feeney is trying to raise awareness among validators running Flashbots’ software that they may potentially be contributing to censorship within the Ethereum network.

According to the CEO of blockchain development agency Labrys, Lachan Feeney, approximately 45% of all Ethereum blocks currently being validated run MEV-boost relay flashbots and comply with United States sanctions.

Speaking to Cointelegraph in an interview on Sept. 30, Feeney noted that while reports have stated that 25% of all blocks validated since the Merge complies with United States sanctions, this is a lagging indicator and the current number is likely to be closer to one out of every two blocks.

Feeney pointed out that MEV-Boost relays are regulated businesses, often U.S.-based, and are “censoring certain transactions in the blocks that they build, particularly transactions from Tornado Cash.”

The CEO also pointed out validators have a financial incentive to use MEV-Boost relays, which would drive an uptick in their usage, noting:

“The issue, is that from the validators perspective, these guys are paying them to sort of do this. So if you want to make more money, you just turn this feature on and as a validator, you sort of boost your yield.”

MEV-Boost relays are centralized entities dedicated to efficient Maximal Extractable Value (MEV) extraction. With Flashbots being the most popular, MEV-Boost relays effectively allow validators to outsource block production and sell the right to build a block to the highest bidder.

Labrys released an MEV Watch tool on Sept. 28, which can inform validators about which MEV-Boost relays comply with Office of Foreign Assets Control (OFAC) sanctions. Referring to the motivation behind the tool, Feeney said:

“We’re just trying to raise some awareness for those who are unaware that by running this software, they are potentially contributing to censorship of the network.”

Feeney noted a worst-case situation often referred to as hard censorship, where “nodes would be forced by regulation to basically discard any blocks with any of these transactions in them.”

“That would mean no matter how long you waited, no matter how much you paid, you would never get to a point where those sanctioned transactions would get included in the blockchain,” he explained.

He also pointed out that even in the event of soft censorship, where sanctioned transactions would eventually be validated, it could take hours and require a high priority fee, resulting in a sub-par user experience.

Related: MEV bot earns $1M but loses everything to a hacker an hour later

These findings are reinforced by Ethereum researcher Toni Wahrstätter, who published research on Sept. 28 suggesting that of the 19,436 blocks verified by the Flashbots Mev-Boost Relay, none included a Tornado cash transaction.

How many blocks from different MEV Boost Relays contain Tornado Cash transactions. Source: Toni Wahrstätter.

Censorship fears were prevalent before The Merge. Speaking to Cointelegraph, the lead investigator for crypto compliance and forensic firm Merkle Science, Coby Moran, suggested the prohibitive cost of becoming a validator could result in the consolidation of validator nodes to the bigger crypto firms — who are much more susceptible to being influenced by government sanctions.