VanEck Research Predicts Ethereum Price to Reach $11.8k by 2030

The comprehensive evaluation on Ethereum (ETH) by VanEck Research, led by Matthew Sigel, the Head of Digital Assets Research, and Patrick Bush, Senior Investment Analyst, Digital Assets, has revised the price target for Ethereum to $11.8k by 2030, following Ethereum’s hard fork. This revision is due to a more precise valuation model that took into account a variety of revenue streams and market dynamics associated with Ethereum’s ecosystem. The analysis was originally disclosed in a detailed blog post on May 9, 2023, and reposted on X (formerly Twitter) recently. It utilizes a combination of cash flow projections and fully diluted valuation (FDV) calculations.

Ethereum’s revenue model was likened to a digital mall that houses various internet commerce activities. The valuation considered the revenues from transaction fees, MEV (Miner Extractable Value), and an emerging revenue stream termed “Security as a Service” (SaaS). The revenue projections see Ethereum’s network revenues soaring from an annual rate of $2.6 billion to $51 billion in 2030, assuming a dominant market share of 70% among smart contract protocols.

The transaction revenue estimation is centered on the “market capture” of smart contract platforms in various business sectors like Finance, Banking, Payments (FBP), Metaverse, Social and Gaming (MSG), and Infrastructure (I). The analysis suggests a shift in the relationship between platform and business revenues over time as off-chain businesses deploy on-chain to reduce costs and seek new revenues.

MEV, profits derived from transaction ordering within each produced block, was acknowledged as an integral part of blockchain’s security mechanism. The analysis assumes a direct relationship between MEV and the value of all assets hosted on Ethereum, approximating a “management fee” for keeping value on Ethereum. The L2 (Layer 2) settlement dynamics are seen as the long-term scaling solution for executing transactions on Ethereum, with most revenue from L2s eventually accruing to Ethereum.

A novel revenue item, “Security as a Service” (SaaS), was introduced, conceptualizing Ethereum’s security exportability to back outside ecosystems, applications, and protocols. This burgeoning use case for ETH is anticipated to grow, although it remains uncertain to predict.

The base case scenario projects an ETH price of $11,848 by 2030, discounted to $5,359.71 as of April 30, 2023, at a 12% cost of capital. This base case assumes Ethereum becoming the dominant open-source global settlement network hosting significant portions of commercial activity across various business sectors. The bear and bull case scenarios provide a wider range of price targets, acknowledging the uncertainties surrounding Ethereum’s future performance.

The extensive analysis by VanEck Research provides a clear valuation methodology for Ethereum and explores its potential as a store-of-value asset in the evolving crypto landscape, in addition to its transactional and protocol utility.

Recently, VanEck announced the launch of its Ethereum Strategy ETF (EFUT), an actively managed fund aimed at capital appreciation through investments in Ethereum futures contracts, rather than direct investments in digital assets. The fund will primarily engage with ETH futures traded on the Chicago Mercantile Exchange, under the stewardship of Greg Krenzer, the Head of Active Trading at VanEck. This initiative mirrors VanEck’s existing Bitcoin Strategy ETF (XBTF), with both funds focusing on digital asset futures contracts. By adhering to a C-Corp structure, EFUT and XBTF may provide a tax-efficient advantage for long-term investors.

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SSV Network Unveils Jato-V2 Testnet

SSV.Network ($SSV), a decentralized staking protocol, announced the public launch of its new testnet, Jato-V2, on September 4. The new testnet is identical to the version currently running on the mainnet, offering a realistic testing environment for users and developers. The launch also marks the beginning of the end for Jato-V1, which is slated for shutdown on September 18.

Starting September 4, Jato-V2 is open to the public and will run concurrently with the mainnet. Users have a two-week migration period to transition from Jato-V1 to Jato-V2. The testnet has transitioned to an ERC-2535 Diamond Standard, enhancing modularity, scalability, and gas efficiency. The SSV Node now fully supports Miner Extractable Value (MEV), allowing validators to participate in MEV opportunities. The new version allows operators to display more granular information, including geographic location and MEV relays. Optimizations have led to a 30% increase in duty execution.

For existing users, the migration process involves removing validators from the Jato-V1 network and registering them on Jato-V2. New users can directly register on the Jato-V2 testnet. Developers and operators should note that new versions of developer tools and the SDK have been released.

The launch of Jato-V2 is a significant milestone as SSV.Network transitions to its Launch phase, with a Permissionless Launch expected later in Q4. The testnet will play a crucial role in the protocol’s development, especially as it becomes the first DVT network to be tested at scale on mainnet Ethereum.

During the migration period, Jato-V2 will operate under a distinct URL, After the shutdown of Jato-V1, the URL will revert to 

SSV Network ($SSV) has announced that its Discord channel, which was compromised earlier today, as reported by Blockchain.News was then “back to normal and under control.”

The launch of Jato-V2 marks a pivotal moment for SSV.Network, offering a robust testing environment as the protocol gears up for its next phase. With the shutdown of Jato-V1 imminent, users and developers have a limited window to transition, making it imperative to act swiftly.

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Tagged : / / / / / Faces Data Leak and Security Concerns

The project, which has recently garnered significant attention in the crypto community due to its rapid financial growth, is now facing scrutiny over data leak and security concerns. A tweet from Cos raised alarms by suggesting that over 100,000 Twitter accounts corresponding to certain wallet addresses have been compromised. This breach poses a significant privacy threat, as these addresses could potentially be linked to unveil more private information about users.

Further adding to the security concerns, Spot On Chain highlighted potential vulnerabilities with the platform. Despite generating an impressive 2,953 ETH (approximately $5M) in fees within just 11 days and the current value of all shares standing at 4,435 ETH (around $7.4M), the project has issues such as potential “data leaks via API” and the unsettling ability for users to “buy/sell shares without an invitation code from the contract.”

Amid these concerns, the platform has also seen an influx of bot activity. DeFiyst pointed out the ongoing Miner Extractable Value (MEV) war on‘s Base, with bots improving exponentially since the open-sourcing of the first snipers last week.

Since its launch, has become a buzzword in the crypto community. High-profile figures, such as Garry Tan, President & CEO of Y Combinator, have announced their association with However, in light of emerging security and data leak concerns, potential investors and users are advised to exercise caution and conduct thorough research before engaging with the project.

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What is MEV Bot?


Miner Extractable Value (MEV) bots have become a prominent feature in the world of cryptocurrency, particularly within the Ethereum network. These bots are designed to identify and exploit profitable opportunities within the blockchain, but they have also been associated with scams and controversial practices. This wiki provides an in-depth look at MEV bots, their functionality, and the ethical considerations surrounding their use.

What is MEV?

MEV stands for “Miner Extractable Value” or “Maximum Extractable Value.” It refers to the potential profits that miners or validators can generate by selectively reordering, censoring, or including specific transactions in a block. MEV arises from the flexibility of transaction processing in the Ethereum network.

MEV is also emerging in the NFT market. Techniques used in traditional MEV opportunities can be applied in the NFT space. For instance, searchers can program transactions to be first in line to buy a popular NFT or buy an entire set of NFTs in one transaction.

MEV Bots Explained

MEV bots are software applications programmed to track the Ethereum blockchain for new transactions, identify profitable opportunities, and execute those transactions on behalf of their owner. These bots aim to capture as much of the MEV as possible and can take various forms, such as flash boats, arbitrage bots, and liquidation bots. 

Arbitrage Bots: An MEV arbitrage bot monitors trades on decentralized exchanges (DEXes) and takes advantage of price discrepancies. For example, it may execute a buy order just moments before a large buy order on a DEX, capitalizing on the subsequent price increase.

Sandwich Attacks: A sandwich attack is a strategy where the MEV bot inserts its trades between large buy and sell orders. This manipulation can lead to profits for the bot at the expense of other traders.

Liquidation Bots: Some MEV bots focus on liquidating troubled crypto-investor accounts. These bots can automatically seize and sell collateral when its value dips too low, earning profits from the liquidation process.

Typical MEV Bots

Flashbots: It is an independent project that allows searchers to submit MEV transactions to validators without revealing them to the public mempool. On July 26, 2023, Flashbots announced it had raised $60 million in a Series B round led by Paradigm, highlighting its significance in the MEV landscape.

Jito Labs: Jito Labs, a Solana MEV software, focuses on maximizing benefits on the Solana blockchain. On August 11, 2022, Jito Labs announced the completion of a $10 million Series A round, co-led by Multicoin Capital and Framework Ventures, with participation from Solana Ventures and others, emphasizing its role in the evolving MEV space.

MEV Bot Profits

MEV Bots are highly active in decentralized exchanges (DEXs). According to an analysis, they account for a significant portion of trading activity, with 50% of trading volume on Uniswap being consumed by MEV bots.

EigenPhi, a leading firm specializing in MEV and liquidity data analysis, provided a case study to illustrate the profit potential of these bots. On February 27th, 2023, the creators of a specific sandwich bot brought it to life. By April 17th, it had gained public attention, contributing to over 60% of blocks and leading to an increase in Ethereum’s gas fees. Though initially slow to generate profits, the bot capitalized on a popular altcoin trading trend, earning $2.7 million in just one week and reaching a total of $6.3 million by May 8th. Utilizing 7082 tokens for sandwich attacks and holding onto certain altcoins like PEPE, the bot managed to outperform its competitors and generate substantial profits.

However, MEV bots are not without risks. They can become targets for hackers. On April 3rd, 2023, several top MEV bots were targeted, leading to a loss of around $25 million. This incident highlights the potential vulnerabilities associated with MEV bots and underscores the importance of security measures in their operation.

Ethical Considerations

MEV bots have been associated with both legitimate profit-making methods and controversial practices. Some strategies, such as sandwich attacks, have been criticized for their manipulative nature. Additionally, the use of MEV bots has led to increased transaction fees and network congestion at times.

MEV Bot Scams

The MEV bot concept has also been leveraged in scams. In 2021 and 2022, there was a surge in fraudulent schemes where scammers promised to show victims how to create a smart contract for MEV trading. Victims were instructed to deposit Ether, which was then routed to the scammer’s wallet. As of the research date, these scams have led to significant losses, with some reports indicating over $250,000 USD stolen.

Regulation and Oversight

The world of MEV is largely unregulated, allowing for practices that might be considered unethical or illegal in traditional finance. Efforts are being made to make MEV more accessible and reduce the negative impacts, but the lack of regulation remains a concern.


MEV bots represent a complex and multifaceted aspect of the cryptocurrency landscape. While they offer opportunities for profit, they also raise ethical questions and have been associated with fraudulent activities. Understanding the mechanics, strategies, and potential risks of MEV bots is essential for anyone involved in the crypto space.

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Here’s Another Airdrop—Be Careful Bots Don’t Steal Your Ethereum

Key Takeaways

  • Trading bots have extracted hundreds of Ethereum from the WTF/WETH liquidity pool on Uniswap.
  • The team did not supply enough liquidity to the pool, making it easy for bots to manipulate the price of the WTF token.
  • Many crypto users have expressed their dissatisfaction with how the airdrop was handled.

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Trading bots battled to front-run each others’ WTF token trades following’s airdrop early Friday. Some bots made off with thousands of dollars in profit, and many early traders got caught in the crossfire. 

Bots Attack Airdrop

The airdrop has uncovered the cutthroat world of botting on Ethereum., a site that allows Ethereum users to check how much gas they’ve spent on transactions, commenced its highly-anticipated token airdrop early Friday. Ethereum users were allocated WTF tokens depending on how much gas they had spent on transactions and how many failed transactions they had incurred. 

The airdrop followed several similar Ethereum token distributions over the last few weeks. On Christmas Eve, OpenDAO dropped its SOS token to OpenSea NFT traders. Following that, Gas DAO and LooksRare launched their tokens in quick succession. However, while the developers of previous airdrops ensured their trading pools were filled with enough liquidity to facilitate trades, it appears that did not. 

According to Etherscan data, the initial liquidity supplied to the WTF/WETH pool on Uniswap totaled only 2,211 WTF and 0.000001 WETH. As soon as the pool was set up, trading bots jumped in, draining liquidity and causing the WTF token to spike in price. Subsequent bots that attempted to drain the liquidity ended up paying large amounts of Ethereum for increasingly small amounts of WTF tokens. 

Chart showing the highest prices users paid for WTF tokens. (Source: @Substreight)

While some of these transactions were sandwich attacks from advanced MEV bots, some also appear to be from traders getting caught by extreme slippage and bots that were too slow in extracting liquidity. Users who were not familiar with Uniswap’s advanced features sent transactions with 95 to 99% slippage, meaning that they only received a tiny fraction of what they were expecting from the trade due to the low liquidity of the pool. 

One bot extracted 58 ETH from the liquidity pool by first buying up all of the pool’s remaining WTF tokens in its first transaction, only to sell them back for nearly six times the price it paid. The bot was able to do this by paying approximately $2,854 in gas to ensure its transactions would be processed before anyone else’s. 

Another bot spent 850 ETH to buy 97 WTF tokens, putting the price per token at over $28,600. However, like the previous bot, this transaction was part of a complex MEV strategy, which ended up yielding the bot a net profit of 0.08 ETH once gas fees were taken into account. 

While the trading bots battled it out in the low liquidity WTF/WETH pool, it’s highly likely that other individual traders got caught in the crossfire. On-chain data shows multiple transactions of users attempting to cash in large amounts of airdropped WTF tokens only to receive pennies worth of Ethereum in return. 

Swapping 12,855 $WTF for about $.07 in WETH, with a gas fee of $450. (Source: Etherscan)

Due to severe liquidity issues caused by trading bots, many crypto enthusiasts took to Twitter to criticize In response, the project’s developers posted an assessment of the situation on Discord, assuring the server’s 73,000 members that the smart contracts had not been exploited and that the liquidity issues were related to Uniswap. However, many discord members were critical of the decision to launch the WTF/WETH pool with such a low level of liquidity, making it extremely easy for bots to manipulate the pool. 

In the run-up to the airdrop, the team announced that there would be a 0.01 ETH fee to claim the WTF token airdrop on top of gas fees. Users could generate referral codes on the website, and they would receive half of the fee if another user claimed using their code. The developers explained on Discord that they implemented the fee to “help make wtf go viral” and so “the team doesn’t have to take a huge allocation of wtf tokens.” has also raised eyebrows after it withdrew 150 Ethereum to Binance last week after accepting donations to the project. Interestingly, bots would have had a harder time taking advantage of the low liquidity if the 150 Ethereum had been added to the pool prior to its launch. is yet to comment on the issue. 

Critics have slammed over its handling of the airdrop. One Twitter user operating under the handle @levels_crypto described the WTF token as a “ponzi.” The Discord server is also littered with complaints, with many members alleging that they were banned by the team after asking questions about the

It’s also worth noting that the airdrop was meant to provide a makeshift rebate for the gas fees users had previously paid to use Ethereum, but the drop itself caused gas fees to spike to absurd levels, resulting in over $7.6 million worth of Ethereum being burned in the process. “ironic,” the noted in reference to the high levels of gas consumption. 

The WTF token currently trades at $0.09. According to, the average amount of tokens awarded is around 275 WTF. At current prices, the gas fees to claim 275 tokens would far surpass their market value. 

Disclosure: At the time of writing this feature, the author owned ETH and several other cryptocurrencies. He was also eligible for the airdrop. 

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MEV and Proof-of-Stake With Eden Network’s Caleb Sheridan

Key Takeaways

  • While MEV is typically associated with Ethereum, Proof-of-Stake networks are also affected.
  • In addition to giving users worse rates on trades, MEV also hurts decentralization on Proof-of-Stake networks.
  • Eden Network aims to combat MEV by redistributing profits through the EDEN token.

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Although Maximal Extractable Value is generally associated with the Ethereum network, there are many ways to extract value from transactions on Proof-of-Stake networks. In this feature, Eden Network’s Caleb Sheridan discusses how MEV on Proof-of-Stake chains hurts decentralization and makes trades more expensive for users. 

MEV on Proof-of-Stake Networks

Maximal Extractable Value, also known as Miner Extractable Value or MEV, refers to profits made by reordering, inserting, or censoring transactions on a blockchain network. It typically affects users interacting with decentralized exchanges and other DeFi apps. While MEV is usually associated with Ethereum, which is currently a Proof-of-Work blockchain, other blockchains using validation mechanisms such as Proof-of-Stake are not immune.

Many forms of MEV that reorder or execute bundles of transactions can be more difficult to pull off on networks such as Solana. However, even on high-speed blockchains, transactions are still vulnerable to MEV via front-running. 

Front-running involves identifying a favorable transaction submitted to the blockchain and quickly placing another transaction to be processed before it. One example of how this can extract value is when a transaction appears on the network for a large buy order of a certain token.

When large orders are placed, the asset price will usually rise due to supply and demand. Knowing a large transaction has been placed but not yet processed, a third party can have their own buy order for the token processed first, knowing that the price will increase after the initial transaction is subsequently processed.

The whole process takes place in milliseconds and is therefore always carried out by advanced MEV bots. Even on networks like Solana, which has a 400 millisecond block time latency, MEV bots have more than enough time to identify these favorable transactions from which to extract value. 

While this front-running process levies a so-called “invisible tax” on traders by making their buy orders slightly more expensive, it also serves many valuable functions. MEV searchers specializing in extracting value through liquidations of loans on lending markets such as Aave and Compound help keep these markets healthy. When several MEV bots compete to liquidate positions, it also helps keep prices optimized. This additionally improves decentralization because liquidations don’t rely on a single bot or mechanism. 

While MEV can be a nuisance for traders, it also helps DeFi protocols operate more efficiently. However, for Proof-of-Stake chains, MEV doesn’t just mean getting slightly worse rates on your trades—it actively incentivizes centralization. 

MEV and Centralization

Before investigating how MEV increases centralization, it’s worth defining the key difference between Proof-of-Work and Proof-of-Stake validation. 

On Proof-of-Work networks like Ethereum, most blocks are mined by pools such as Ethermine and f2pool. These pools link individual miners from all over the world and combine their hashpower to try and mine blocks. Miners process thousands of equations per second, in the hopes that they can find the correct answer first and receive the privilege of mining the next block. Using this validation method means that there is no guarantee as to which individual miner in a pool will hit the next block, if at all, making it near impossible to predict. 

In contrast, for most Proof-of-Stake networks, the more stake a validator has delegated to them, the more often they get chosen to write new transactions in the next block. While this mechanic is necessary for staking rewards to scale with the number of tokens staked, it causes problems with how it affects the behavior of those conducting MEV activities. 

Because dominant validators are often able to write transactions first due to their large stake, they have the most opportunity to execute MEV on transactions. Eden Network’s Caleb Sheridan explained to Crypto Briefing how the validators with the highest stakes can form a monopoly on MEV as they can submit responses to transactions they hear about before anyone else. He said: 

“Let’s say you had 100 tokens staked, or enough to give you an advantage, you would earn more money from MEV activities, and you could stake more tokens, and you could actually have more power in the network to do more powerful things. It just keeps going like that, and nobody can really unseat you, and so it has the name “the Kingmaker effect.””

This creates a situation in which a single validator or “T-Rex” can take advantage of almost all of the MEV opportunities on a network. Sheridan explained how a dominant “T-Rex” recently capitalized on the MEV opportunities on Avalanche: 

“On Avalanche, there was a T-Rex—there’s always one of them. But in this case, there was one bot doing every single decentralized exchange arbitrage and every single liquidation. Every single everything, and then just applying the profits back into the underlying stake and getting very powerful doing it. In Avalanche’s case, they actually changed their consensus mechanism a little bit to stop it from happening.”

In addition to centralizing MEV activities to a single validator, the mechanisms that produce the Kingmaker effect also incentivize validators to group up geographically to discover transactions on the network faster. Sheridan added: 

“If you have a server with a huge amount of stake sitting next to a bunch of other servers, you hear about the transactions faster. You can get your own transactions and blocks propagated faster, and it makes it really advantageous for you to sit right next to everybody else’s nodes.”

The most likely way this grouping of nodes happens is through a centralized provider such as Amazon Web Services. As those looking to conduct MEV activities are incentivized to host their nodes on the same servers as the biggest validators, a large portion of the network can end up concentrated in a single data center. This could expose a network to a single point of failure if the server hosting the majority of nodes went offline. 

While MEV on Proof-of-Stake networks has proven to be problematic, the situation isn’t unfixable. As Avalanche did, other networks can alter their consensus mechanisms to prevent “T-Rex” validators from dominating MEV and hurting decentralization. Additionally, projects such as Eden Network are allowing users to take back control of their trades by protecting users from front-running and redistributing MEV profits through the EDEN token. While Eden Network currently only operates on Ethereum, Sheridan revealed that it is looking to expand to other Layer 1 chains in the future when trading volumes increase enough to make a launch viable. 

Disclosure: At the time of writing this feature, the author owned BTC, ETH, and several other cryptocurrencies. 

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Discussing The Latest Lightning Network Developments

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With the rollout of bitcoin as legal tender in El Salvador, there have been some privacy concerns regarding Chivo, the government-sponsored wallet through which all citizens were issued $30 in bitcoin.

If Salvadorans prefer that their government not monitor their transactions, it’s critical that they opt to use other Lightning Network wallets, such as Muun or Breeze instead.

“If they just get it out of Chivo Wallet to another channel, all user-facing, like Lightning wallets out there, they’re going to be private channels,” said Shinobi, during a Bitcoin Magazine Twitter Spaces conversation on the topic. “You’re not going to be able to figure out where that UTXO is, without a lot of on-chain analysis, looking at the counter party, and if they have any funds that got closed and maybe mingled with other chains. That should cover the basis for most people, just worried about the government seeing where that money is going.”

The discussion moved to the Lightning Network, specifically the merits of replace-by-fee (RBF) and how merchants should deal with accepting zeroconf transactions in order to create a positive customer experience, while also preventing double spends.

“Most people buying things from e-commerce expect to get them instantly, because they’re used to, like using credit cards and such,” said Bitcoin Developer John Carvalho. “We can’t do this with RBF, because RBF allows the user to also change the destination of the transaction. Essentially, programmatically double-spend the merchant. You can’t really accept an RBF transaction with zeroconf.”

Another uncertainty with Lightning is the potential for MEV or “miner extractable value” to become a problem. MEV is a measure of the potential profit available to a miner who re-orders transactions within a block.

“The general idea is that in a blockchain that deals with transactions, there are sometimes opportunities for the person who has the control over ordering of transactions that go into blocks to extract value based on the order that they put those transactions into a block,” said Lisa Neigut, a c-lightning developer.

Carvalho proposed a solution that involves preventing miners from having enough information to recognize whether re-ordering transactions would be profitable.

“The idea would be to create abstractions, or abstraction networks that are difficult for miners to gather information about,” he proposed. “That way, you are basically insulated from their ability to determine what exactly what you’re doing is, and whether it’s worth more to you than a plain old Bitcoin transaction.”

To conclude, Lightning Labs’ Ryan Gentry shared what he’s most excited about regarding the future of Lightning.

“Just getting more people into the space, getting more people interested, which inevitably leads to more developers, into more startups,” he said. “I’m just really excited for the unknowns that are going to pop up over the next six months, that are going to come out of this surge of adoption. There’s Lightning Labs and Blockstream, Sync, Square Crypto. Of course, we have really long-time horizons that we’re thinking about, and the stuff that we’re excited about over the next three to five years, in terms of protocol development”.

The full recording of this Spaces conversation includes many more details and discussion. To read the whole conversation, check out the unedited transcript below:

[00:00:06] P: John, give us your deets.

[00:00:09] JC: Hey, I am John Carvalho. At the moment I have a podcast called The Biz. You can check out I am CEO of a stealth mode company, making Bitcoin and Lightning software products to prepare for hyper-Bitcoinization.

[00:00:23] P: Vivek, you’re up, my friend.

[00:00:24] V: My name is Vivek. I do business development for Blockstream, on liquid and relay to our Greenlight product. I just might be part of the some idiots crowd John had mentioned.

[00:00:38] P: Every time, man, you always undersell yourself. It’s adorable. Vivek is incredibly intelligent. He likes to describe himself as a BD, just a sales guy. The truth be told, he’s helped me organize most of these Lightning-focus spaces. He’s incredibly knowledgeable about all this stuff. When he speaks, you all should listen.

[00:00:54] V: I don’t know what you’re talking about. I’m Lisa’s pet lizard.

[00:00:57] P: That is also true. Those things are not mutually exclusive. Lisa, give us your deets.

[00:01:01] LN: Hey, friends. I’m Lisa. Sorry. I’m eating ice cream. I make a blockchain with my pet lizard, Vivek. I work on C-lightning, which is a Lightning implementation, that’s written mostly in C. I think, one of my coworkers is working on slipping some Rust in the side. We’ll have to see how that works out.

[00:01:18] P: Slipping some Rust in the side. That sounds painful, but I’m here for it. Rust is an incredibly cool programming language, and –

[00:01:25] V: You heard it here first. Tetanus Lightning.

[00:01:27] P: Yes. Once I am a software engineer. Done a bunch of other stuff, but I love taking physical things apart. When I was in high school and college, I had this truck that was just beat to shit, and I would drive to scrap yards and just pick through all this piles of rusty metal, looking for weird shit. The fifth time, I cut myself on a piece. I was like, “I should get a tetanus booster.” I went to the doctor and she was like, “Here you go.” I felt much better after that.

Let’s go on. Lisa, I wanted to talk to you about the super-interesting piece you wrote recently about MEV on Lightning. I definitely want to get into that, but before we get into that, are there any other current events that anyone that’s on stage is particularly excited about, angry about, upset about related to the Lightning Network?

[00:02:12] V: I really want to know how, if I was a El Salvadoran citizen, how I can privately use the Bitcoin I was gifted, or HODL, or what are my best approaches?

[00:02:26] P: That’s a great question.

[00:02:28] S: Get it out of Chivo wallet?

[00:02:29] V: Do you guys want to hop into it now, or go back to that after the MEV stuff?

[00:02:33] P: Yeah, let’s go into it.

[00:02:34] V: Okay. Yeah. I was curious, I guess, the current way people would do things is you want to move that to custodial, non-KYC wallet. Then after that, send it to your Lightning node. Then if you have to end up closing a channel and you get that UTXO out, then you’d want to mix that. Then, mixing that opens up the whole other can of worms and the flame wars about the coin join implementations. I’m just wondering, what can realistically, a novice user in El Salvador do?

[00:03:12] JC: I think that you should at least have to define private from who, when you’re having a privacy conversation, because I don’t know. These conversations just always feel we’re just talking about this broad spectrum of privacy that should apply, and the standard of privacy that is not really realistic, that we should somehow be able to achieve for any given situation. I think, it matters private from who, what is the level of fear or danger here, and what do you actually make the trying to be private from? Because there’s probably different methods for doing it. Probably, some would be overkill.

[00:03:45] S: If you’re talking about from the government that they just get it out of Chivo Wallet to another channel, all user-facing, like Lightning wallets out there, they’re going to be private channels. You’re not going to be able to figure out where that UTXO is, without a lot of on-chain analysis, looking at the counter party, and if they have any funds that got closed and maybe mingled with other chains. That should cover the basis for most people, just worried about the government seeing where that money is going. You would have to do a very complicated analysis and hope that hit chain without having spent any first to be able to try and correlate the amount closing on-chain to really tie that to any of the airdrops through Chivo.

[00:04:30] JC: I would say, you probably don’t want to be trying to hide the $30 of Bitcoin they gave though. That’s probably a futile effort.

[00:04:35] P: Definitely. Even a great point. John, can we just reiterate who one might be trying to obscure these transactions from? Obviously, we’ve got the Salvadorian government. Who are the other potential actors that people might be able, or might be, as I said, wanting to obscure their actions from?

[00:04:52] JC: Just there, you can think of typical cases and use cases where people want privacy aside from government. I don’t know. Sometimes privacy from your boyfriend, or girlfriend, or spouse, or somebody in your family that you’re worried is on drugs and will steal your money. Generally, there are a lot of reasons to hide your worst. You don’t need to hide your Lightning channel activity from your crazy uncle. It just really depends what you’re trying to do.

[00:05:17] V: Maybe the things that are probably within the realm of their needs would be to make sure when they go spend somewhere, there’s no a price discrimination, where they can charge them a greater price. Granted, I doubt that their potential adversaries are knowledgeable enough to be probing and figuring out where balances are. Yeah. Just curious how all of this evolves and what are the best things they can do? Yeah, most people are concerned, which has making sure you get off Chivo. I think, that’s probably an excellent step.

[00:05:49] JC: Pretty much anyone that would be essentially a consequence of violence. If somebody could be violent towards you because of your Bitcoin, then that’s probably why you’re looking for privacy.

[00:05:59] P: Yeah, absolutely. I guess, what I was getting at is that, of course, if you have a wallet address that has 5 Bitcoin in it and you pay someone for a coffee, they immediately can see if it’s on-chain, that that came from your address with 5 Bitcoin. Privacy becomes really important. It’s not just about trying to protect yourself from the government, or your crazy uncle. It’s just a matter of good opsec. Now, if we’re talking about Lightning, it gets different obviously, but it’s important to be thinking about.

[00:06:23] LN: I have a quick question on that topic and before we move on. Sometimes when you give up some amount of privacy, you get other things in return. I guess, for custodial wallet, you could argue that by having a custodial wallet, so you let the custodian see general transaction history, they know who you are, they know who you’re dealing with. In exchange for that, you get, some might say the – you don’t have to manage your keys, because the custodian is doing it for you, and there’s some amount of convenience of having always on service that clearly, all these things I’m saying with caveats, but there’s a trade-off.

Like with the Chivo wallet in particular, is there any particular trade-offs that you got from using the wallet? Any nice to haves from Chivo wallet particular, above and beyond maybe any other self-hosted, or self-custodian Bitcoin wallet? Does that make sense?

[00:07:09] V: There’s probably balances and routes and pre-Bitcoin, like Shinobi was saying.

[00:07:15] JC: I don’t think any of us have tried the wallet, so I’m hesitant to comment. My guess would be, yeah, centralized services, like person-to-person transfers within the ecosystem without a fee and stuff like that.

[00:07:25] P: Do we know if, or has anybody heard if the wallet provides the functionality to convert Bitcoin directly into USD natively? Or is that a separate thing? Because they know they have the trust that they set up?

[00:07:36] V: I haven’t been to El Salvador or anything. From what I observed, it’s the ATMs that do that.

[00:07:42] P: Oh, I see. Okay.

[00:07:43] S: I know, I thought that the wallet had the capability to host a fiat balance and do the conversion as well?

[00:07:49] JC: As far as I know, you don’t have to have Bitcoin exposure if you don’t want to. It must do some conversion automatically, at least.

[00:07:57] LN: Can I download this wallet? Does anyone know if it’s available on the app store? How do people in El Salvador get this wallet?

[00:08:03] JC: I’m pretty sure it’s in the app store there. I don’t know if you can get it though.

[00:08:06] V: Can’t throw a VPN on?

[00:08:08] P: All right. I’m going to us forward, unless Lisa, did you have any other thoughts or questions on that? You brought it up a second ago.

[00:08:14] LN: No. Sorry. I’m just really – No, I don’t. No.

[00:08:17] P: Yeah. I’m also super curious about the ins and outs. I really want to figure out how to play around it myself. If you figure it out, please let me know. I wonder if just having a VPN would allow you to do. All right, what about you, John? What has come up recently that has been particularly exciting to you, concerning, or just interesting in general, related to the Lightning Network?

[00:08:34] JC: Related to the Lightning Network, the only things that come to mind are still stuff that I can’t talk about. I would say, maybe somebody who caught the debate recently around RBF, and we could talk about maybe how RBF affects Lightning Network in any way and that kind of thing, if that’s relevant. I don’t want to turn this into an RBF debate.

[00:08:53] V: John, we were having that debate four years ago and we’re still having it. It’s to go or not.

[00:09:00] P: Can you can you just summarize for the audience what your view on that is, and why you think that’s not necessarily a good thing?

[00:09:06] JC: Okay. we are going to do this.

[00:09:09] P: Let’s fucking go.

[00:09:11] JC: My agenda there was just basically, to promote the idea that merchants can offer zero confirmation transaction acceptance as a service. It’s something that they can do relatively really very controlled, in a very controlled way to limit their exposure and monitor and keep things under control. Despite the fact that accepting zero confirmation transactions does expose you to double spending opportunities for the people buying things from you, particularly for the company that is the flagship of this idea, which has Bitrefill, who has accepted zero confirmation Bitcoin payments for many years now, and really has had very minimal costs to doing that.

The idea is just basically, you can monitor the transaction fees of the transactions that are incoming to see if they have a sufficient enough fee that they were – they’re likely to be confirmed in the next block. Then accept that as a zero confirmation transaction and reward that customer, or pay that customer, whatever it is they purchased. In Bitrefill’s case, a gift card. A gift card is the most risky thing to offer this way, because it is essentially, a private key for credit at some website. It can be basically rendered instantly by the customer, and so you can’t get refund, or undo anything.

Double spending is particularly perfect for the situation. Bitrefill has somehow managed to not really be double spent. I think, maybe they had one or two small ones. You’d have to ask Sergei over there for the details. Generally, nothing really significant. This is done by monitoring the transaction, checking what transaction it is, because it can’t be RBF, which is the main point here, which I’ll get to.

Also, just choosing what their total exposure would be. Basically, saying like, we only want to have maybe $20,000 worth of orders open that are currently zero conf’d, and we’ll cap it at that. That basically maximizes your exposure at all times, to like, the most anyone could ever possibly double spend you for in a moment. You could take that cost and think of it as a cost of doing business, or cost of providing that service, and maybe even a cost of reducing customer service, or things like this, related to not accepting zero confirmation payments, because they do add the customer service costs and various confusing situations for people when shopping.

When they’re RBF transactions, which is replaced by a fee, the RBF transactions are better enforced by nodes. Basically, they allow the customer to change, to edit in transaction. Typically, this is used just to add to the fee to try to make it, so you can pay the lowest fee possible when you’re submitting a transaction. This is not an ideal format for buying something when you want that thing instantly.

Most people buying things from e-commerce expect to get them instantly, because they’re used to, like using credit card and such. We can’t do this with RBF, because RBF allows the user to also change the destination of the transaction. Essentially, programmatically double spend the merchant. You can’t really accept an RBF transaction with zero conf. The whole topic was actually, just me saying that I thought app creators, wallets and people making app level software, there are some, and just because they’re here, we might as well just say, Blockstream is one of them, Green is one of them, that default all transactions to being RBF.

I believe, I think, and it was just changing, but I believe at the moment, you can’t even change it. They all have to be RBF. for merchant situations, I consider mobile wallets to be spending wallets. They should have at least, the capability to turn off the RBF. Then even better, the RBF should be turned off by default, in my opinion, in hot wallets, because it creates a better user experience for spending wallets. That’s the whole summary, I think.

[00:12:50] S: Vivek, because this is such an easy thing to solve. I have literally had dash developers spurred out at me. For saying this, just update the URI form. The default for the wallet should be irrelevant if you can flag in the URI invoice that the –

[00:13:09] JC: Yeah. This is definitely a subtle aspect of the conversation, but it is more interesting than the previous debate, because it’s actually relevant. I would say, what you’re talking about, that becomes a business development effort, like getting all the wallets to do the thing. That’s what I was doing on Twitter is I was doing lazy business development. I’m saying, hey, without actually contacting all the wallets, I’ll just say, “I think people should think about this and have this value, and it should become part of our culture and normal.”

Yeah, you could think of a lot of ways to improve the payment formats and the way the apps communicate with each other, and URiS and having things like this. We’re supported everywhere. Would it be a good way? You have to, again, get everybody to do it, because it’s not an enforceable protocol. You can’t bake it into Bitcoin. I don’t know. Businesses don’t typically do very well trying to participate in the bit process and you know how that goes.

[00:13:59] S: It’s the same amount of effort though, to try and get people to change the default behavior for RBF. Why not just go the extra step –

[00:14:07] JC: It’s really not though. It’s really just convincing Blockstream mostly, just to be honest.

[00:14:12] V: I just wanted to quickly add that, the term that John was trying to look for is allowance for doubtful accounts. That’s the appropriate accounting and compliance bureau speak term. That’s pretty much it. That’s where, I guess, they’re comfortable with potentially losing those receivables as John stated, that is traditionally already expected in credit card chargebacks.

[00:14:34] P: Got it. Two things. One, I just want to welcome Ryan onto the stage. Good to see you, man. Thanks for being here.

[00:14:39] RG: Hey. Thanks for having me.

[00:14:40] P: Yeah. Absolutely, man. Then I want to give Walton a chance to jump in. He’s been very patient with his hand raised and then I want to go back to Brian Shinobi, hybrid creature, and I want to let you finish saying what you were going to say

[00:14:50] W: Hey guys. I had a comment just on the VPN question before, because I’ve asked someone in the UK, who’s regularly trying to pretend to be in other countries. It’s something I’ve explored extensively. Unfortunately, VPN alone will not suffice, because I’m certainly not an iOS, because the app stores are country based. Even if you can pretend to be in El Salvador, your app store will still be a US app store, or UK app store, whatever it is. If it is geographically restricted, you won’t be able to do it, if you’re outside of El Salvador.

[00:15:21] P: I see. Thanks, man. I appreciate it.

[00:15:23] RG: I wanted to jump in real quick to vehemently disagree with John, because that’s what I had to tell you I was going to do in order to get up here. I think, the RBF by default is good because it does line up with the fact that on-chain transactions are only probabilistically final, right? We’re very used to a world where there are no reorgs and that a block gets confirmed and everybody’s just nicely builds on top of it. That’s not the guarantee from the protocol.

The only protocol that we have in Bitcoin, does guarantee absolute finality within seconds is Lightning. I think, it’s more consistent with what the protocol offers actually to have RBF by default on-chain and not to try and let people believe that on-chain, zero conf on-chain transactions are instantly final. I will say that this is, I think, a nice area of bonding that where Blockstream, and at least myself likely more have.

[00:16:13] JC: I think, you’re having maybe just a whole different conversation than I’m having, because I’m not trying to say people should not understand that Bitcoin works in that way. Or trying to get them to think Bitcoin works in a way that it doesn’t actually work. I’m trying to say, that merchants can do this. They can provide this spectrum of service in a very controlled and safe way, and it is economically viable and rational to do so for both parties, both the customer and the merchant. It’s basically a win-win and that win-win is better facilitated, especially within the environment of a spending wallet, a hot wallet by certain defaults. In general, I don’t think that having protocol developers and low-level developers influencing how people use things with default settings. It can be a very dark design pattern behavior.

[00:17:02] P: I just want to let – goddammit, your name, Brian Shinobi, Shinobi Brian jump in and finish what he was saying earlier. Then let’s jump back to Ryan and –

[00:17:10] S: It’s like, what John is talking about, I think, effectively boils down to people should be able to take risks that they judge accepted. I agree with that. Ryan is entirely correct that the economic reality here is that RBF will just inevitably be –

[00:17:28] JC: Nobody said the opposite, though. That’s the point.

[00:17:31] S: John, can I finish? The whole point I was trying to get at earlier though, is just by tweaking the URI to have a flag that wallets will respect and pushing for something like that, you don’t even need to get rid of the RBF flag. Just lock it in with the highest sequence number, so that nothing else can replace that. You effectively have the same guarantees of a non-RBF transaction. It would just be a lot more sensible from my point of view to push for that URI change. It would be a very simple single flag in the QR code that somebody scanned, and then a warning that goes, “Hey, your wallet is deviating from your normal expected behavior. Are you okay with this before they finalize the transaction?” It would give the same guarantees that a merchant is looking for, if they choose to accept zero conf chain level.

[00:18:25] P: Ryan, what do you think?

[00:18:26] JC: I can’t say, what would change Blockstream’s mind for Green, as an example, to accept a new URI scheme and participate with it, or support it, or to just add toggle capability and default off to RBF. I don’t know which thing they would go for it easier. I actually do think that RBF toggle is much easier to implement, but neither one is hard and neither one is all that disruptive. I don’t think there’s a huge difference. It’s mostly up to just Blockstream, what their belief is and how they want the user experience to be in their own wallet.

[00:18:56] P: Ryan, what do you think? Oh, go ahead, Nifty. Actually, you first and then Ryan. I’d love to hear your thoughts.

[00:19:00] LN: Yeah. I think it’s important to point out that this RBF conversation is pretty far removed from the Lightning spec. That the party opening the channel is the one who builds the opening transaction for funding the channel. They’re choosing to do the zero conf, or whenever, they get to pick what transaction they’re going to do. Hopefully, the person who’s deciding what transactions you do is the same person who’s doing the zero conf thing, and they can decide what kind of RBF, or not RBF stuff they’re going to use.

I don’t know how many people are actually opening Lightning channels using the Green wallet, I would say. It sounds like, this is definitely a feature request for Green. I’m sure, John’s not the only one that would like to have a flag for whether or not to do RBF stuff in the Green wallet. I’m not really sure that’s this a Lightning center chat is the right place.

[00:19:56] JC: This has nothing to do with Lightning at all. There’s no Lightning [inaudible 00:20:00] for Green wallet.

[00:20:02] P: Fair enough.

[00:20:02] LN: Okay. Cool. Yeah. All right. We’re on the same page then. Cool.

[00:20:05] P: Yeah. Yeah. What I’d like to –

[00:20:06] RG: I can bring it back to Lightning, though.

[00:20:07] P: Go ahead, Ryan.

[00:20:08] W: [Inaudible 00:20:08] isn’t it? Because it’s like, instant payments, right?

[00:20:12] RG: Yeah. I think, the one thing John brings up a point that, that him and I, in particular, we talked about a lot which is, this is a business decision. Should protocol developers have the ability to disincentivize, what is the legitimate business operation in accepting zero conf transactions? I think, that there’s a lot of overlap here with the Lightning protocol stuff as well. I think, the more meta question is should protocol developers have the ability, or feel empowered to disincentivize certain legitimate business activities?

That’s a really hard question. What we’re talking about here, where we’re disagreeing really is more on time horizon than anything else. Can Bitrefill successfully receive zero conf transactions today? Yes, absolutely. Do we think they’ll be able to do so in 10 years with a really liquid, immature Lightning Network, where that will just be a better solution entirely? Yeah, probably.

When within the next 10 years is the time for protocol developers to say, “Okay, we’re going to go to RBF by default, because it’s good for all of these holistic reasons that don’t affect the refills direct business at all, and Bitrefill is going to have to change their business practices because of all of these bigger, more community benefits?” I think, that it’s a really interesting theoretical question. It’s one that, there isn’t really a one-size-fits-all answer to. I am generally in favor of wanting to push more people to using Lightning-based solutions, but obviously, I’m horribly biased in that opinion.

I think, John has very legitimate concerns in saying, “Wait a second. This is core to Bitrefill’s business. Maybe Bitrefill has more failures with Lightning right now, than they do with accepting the zero conf on-chain transactions.” Hey, protocol developers, there’s no reason, and you have no leeway in telling us how to run our business. I think, it’s a very interesting meta question about protocol design decisions, versus more commercial interests. There isn’t really a good answer to it.

[00:22:00] JC: I have two points I want to bring up. One is, as a culture, generally, protocol developers are fairly averse to businesses influencing the protocol and influencing how things work with Bitcoin. I think, it would be at least logically consistent for them to have a similar approach with their influence over users. Doing things, like forcing a default of something that is not the base Bitcoin transaction typically. That’s inconsistent with not wanting to be influenced by businesses.

I think people should be willing to be influenced by anybody useful, but just generally speaking, that’s just one contrast I wanted to paint. Then, another thing I wanted to bring up is, I think what – Walton was hinting at this, and you were just now. This is not necessarily me saying to do this, instead of onboarding people to Lightning. This is talking about the current situation. It’s talking about providing zero conf sentence as a service.

It’s not talking about changing protocol, or changing knowledge, or anything like this. It’s just talking about covering an additional part of the spectrum that can be covered right now. There are people that don’t use Lightning. There are people that can’t afford to pay on-chain. There are people that do spend on-chain, and those people can have a better user experience simply by intentionally preparing for it.

[00:23:12] P: Got it. Okay, good points all around.


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[00:26:41] P: I want to move us on to talking about Lisa’s recent article, ‘MEV over Lightning’. Because I know, Lisa, you got to go in about 25 minutes. Let’s shift over to that and dive in. Can you give us a high-level summary of the article that you wrote and what the major points are?

[00:26:58] LN: I can try. I have to admit, I tend to be a little forgetful. I can do my best, though. I think, there’s some interesting tie-ins here between this question about what does business and protocol is exactly. Hopefully, I’ll be able to tease it out as we go through it, because that may be interesting. I think, so maybe the best place to start is a short introduction to what MEV means. I’m sure there’s people in the audience who’ve never heard that term before. Might be totally new.

MEV is a term that I’m going to say, originated in one of the Ethereum communities and the Bitcoin community. It typically deals with this idea of – so MEV, it’s Maverick MEV. It stands for Miner Extractable Value. The general idea is that in a blockchain that deals with transactions, there are sometimes opportunities for the person who has the control over ordering of transactions that go into blocks, to extract value based on the order that they put those transactions into a block.

It’s really more of a thing on Ethereum, because of the way Ethereum works in terms of being a execution. Transactions in Ethereum block, or execution, each of them updates some global state that everyone reads and writes from. By moving your transaction to the top of a block, you would get executed. Your transaction logic would update the global seat before anyone else’s, and in a lot of cases or some cases. It depends on the current state of the global state, so to speak.

The ordering can be quite profitable, if you get to say what order those transactions go in. Specifically, one example, I think, probably the easiest one is certain arbitrage is become possible depending on, you see a trade that someone wants to make, say, submit a block to a mining pool, and then you see it enter the mempool, it gives you an opportunity to make another transaction, maybe that goes on a little before, like it was right before or right after it. Then, you basically, would bribe a miner to order the transactions in such a way.

Part of how you’re bribing them is you’re giving them a portion of the arbitrage that you would gain, because that’s more than they might get by just taking the fees for the transactions. The miner submits a blocked to be mined, such that your transaction gets ordered in front of the other one. Just to recap. The whole idea of MEV is, is there opportunity for the economic incentives of miners to not necessarily come to the forefront, but become a pressure on the design of the system, design of the protocol itself, such that we would maybe need to make changes, or new infrastructure would need to be built for Lightning, because someone, or something has identified opportunities for ordering of transactions, or maybe channel opens in such a way that there’s value there that can be extracted, so to speak.

I think, that’s the overarching scheme of the article that I wrote. I guess, that was last week. It feels like a long time ago. Yeah. It’s the overarching – No, really was two weeks ago. Sorry. It was the overarching idea of the paper, or I should say, article. Then in the article itself, I go through and just looking at them, but Lightning, there’s two different places you can say, okay, Lightning MEV, does it exist?

One is on on-chain, the layer one stuff. The places where Lightning interacts with the Bitcoin layer, so on-chain transactions. Then, the other place it’s more interesting to look at for extractable value, maximal extractable value is MEV is sometimes called – would be more the Lightning payment infrastructure layer, so just on layer two itself. It’s the big, broad points there. Maybe I should, I don’t know if anyone has questions, or maybe corrections about that. While you do that, I’m going to go find the tweet where I talked about it, so I can share it, so people can check out that article.

[00:30:57] RG: One very small correction in favor of Bitcoin maximalism. MEV started in the Bitcoin ecosystem. The original paper was James Prestwich, [inaudible], and Brandon Curtis trying to prove that actually, the fee market was going to be fine. Then everything else, Ethereum stole it from us.

[00:31:14] P: Bastards.

[00:31:15] RG: Then, I think, when I read the article, one thing that popped to mind immediately was Shinobi and I have tweet argued about this in the past. Say you have a really large market maker who is running a really liquid Lightning node in between FMX, correct. He has direct channels with FMX, crack him and OKX, and it’s just sitting in between these three destinations, just routing arbitrage between all three of them.

Theoretically, that node in the middle could notice a bunch of flow being routed into the tracks, and maybe that’s usually correlated with a price dump on that exchange and could hold up funds that are supposed to be forwarded to different apps, short on the next exchange and then let the funds proceed onto FMX. That was the example that came to mind really, with regards to, I don’t know, we should have a – it should be rev or something, routing node extracted value. We’d have, I don’t know, something like that. I thought that was an interesting example that immediately popped to mind when I read the article, which is very good, and I recommend.

[00:32:24] V: Minor correction. It was not Bitcoin maximalist, Jim Prestwich. James Prestwich works on atomic swaps and Brandon Curtis was that radar relay, working on Lightning. Not quite the Bitcoin maximalist you’d expect.

[00:32:39] RG: Yeah. They’re Bitcoin pluralists, I guess, is probably the right word.

[00:32:45] P: I haven’t heard that one before.

[00:32:47] LN: Yeah. I don’t think many of those people work in a Bitcoin ecosystem now. I think, like Prestwich does a lot of work in –

[00:32:52] RG: Yeah. You’re both very right. The original MEV paper was all about Bitcoin. It was not about state folds, smart contract chains. They were actually, I remember they were really disappointed, because the point of writing the paper was they were trying to prove that actually, even with a we can see market, like Bitcoin’s long-term security budget went too far. Yeah, they found very close.

[00:33:14] JC: To try to turn this into more of a little more abstract conversation, I think what MEV actually is, it’s actually taint and metadata created. Basically, a form of privacy loss. If miners can gather enough data about that is anchored to Bitcoin transactions, they now have information that they can use to their advantage for selecting whether to include those type of transactions, or how much of my costs to include them in this thing.

It’s like, the way that you can avoid MEV is one, not using Bitcoin as an abstraction anchor. if you are going to do that, for example, anchor layers to it, anchor tokens to it, etc., anchor identities to it, these things will create MEV opportunities. That’s why there’s so much about Ethereum, because they have so much base layer abstraction going on throughout the smart contract.

[00:34:01] LN: Actually, I think I pushed back that a little bit. John, I think you point out a pretty good point, and one that I’ve forgotten. It’s actually in the article, is one of the core tenants of what creates these opportunities and that’s information. You were calling it meta data. I think, you can, even more general and just say, information in general.

Typically, that’s information about desired actions. When Ryan was talking about the rev, or the hub. Someone else have read my article and was like, I think, had the exact same reaction, that they call it the hub, hub extractable value, to just basically, the same idea. Basically, your centralized thing. You have access to flow, basically, as you have information. The thing is with a chain, so by sending transactions to a mempool, for example, you create mempools are by their nature, public to anyone.

That’s why the reach of the chain is any of your desired actions, or your order flow, so to speak. I think, maybe talking about it in terms of order flow, which is typically used when you talk about making stock transactions. It’s actually a nice way to term it. The reason for that is that it makes, I think, a lot of these issues easier to see in the practical application of them. Anyways, so when you have a mempool, so any layer one for the most part, based on the fact that it’s entirely distributed and there’s no centralization, any transactions that you’re looking to get mine, for the most part, you send through this public relay, transaction relay called the mempool.

I think, most chains, most layer ones have mempools. The way that you get around it is by set – if you put a transaction the mempool should say, then it becomes basically, public information. There’s this delay in time between when you make your information about the trade you want to make public and the time that trade is actually effectuated, or in blockchain speak, included in a block. Transaction processing on layer one is batched. It happened in batches and the speed at which those batches happen is usually the block times. In Bitcoin, that’s approximately every 10 minutes.

Anyways, so then you get back into what’s information like on a layer two? How much information? Who has privilege access to information flow on layer two, such as Lightning, for example? Lightning is actually, really private, provided you’re not doing this hub-centric thing, where all of your transactions are going through the same hub. That hub, maybe it’s actually some big exchanges, Lightning node, and so they’re looking at all of your transactions as they go through, and then they can use that Lightning transaction data to do arbitrage plays on their centralized exchange, or whatever, like some exchange that’s associated with Lightning, or that Lightning’s that interface to.

Anyways, ignoring that thing, if you’re just looking at it, the more single Lightning node has payments coming in and coming out of it, because of the way that the Lightning Network has been architected, it’s very difficult to know where those payments are coming from and who they’re going to as they pass through your node.

The information that you have about any transaction, that flows through, there’s a couple of things here. One is that any transaction that goes through the Lightning Network, in order for you to even know that happened for the most part, it needs to go through your node. Then, even if it doesn’t go through your node, you really have no idea where it originated from, or where its final destination is. That’s due to the way that the onion messages that are Lightning payments are sent through, or wrapped up, or packaged. Yeah. I think that this information, this idea about how much information are you publicizing and to who, is a really big and important part of the extractable value equation, so to speak.

[00:37:44] JC: I got a little bit less than what you were specifically – you said you were pushing back on something, so I’m not sure what you were disagreeing with. I’ll add just basically, the subtlety I was getting at is that I wasn’t trying to single out the Lightning Network necessarily, so much as say, when you anchor things to Bitcoin, if the miners are able to collect metadata about the activity that you may create MEV opportunities, or opportunities to have your transaction censored, etc.

This can be anything. It could be Lightning, etc. The idea would be to create abstractions, or abstraction networks that are difficult for miners to gather information about. That way, you are basically insulated from their ability to determine what exactly what you’re doing is, and whether it’s worth more to you than a plain old Bitcoin transaction.

[00:38:30] S: If I can hop in really quick. That’s the whole logic for why anything anchored on Bitcoin should be as distributed and decentralized as possible. That’s one of the big reasons why the notion of big central hubs is poo-pooed on, because too many players connected to that offers that operator an opportunity to push things to chain, actively disrupt what’s going on-chain and take advantage of that economically, if they have hash raid.

[00:38:57] V: John, I want to see a fully integrated Lightning miner. I don’t support zero conf, but I want negative conf, where I can directly get the block reward into a Lightning, usable output and use it in Lightning before those hundred blocks. Yeah, that’s pretty much it.

[00:39:14] JC: I think, I could work with you on that. We’ll do a business development with blockchain.

[00:39:18] P: That’s it. Nobody else has any thoughts?

[00:39:20] V: No, zero conf, though. Just only negative a hundred confs.

[00:39:23] RG: One thing that I think is an interesting counterpoint to, when you think about the design of a Bitcoin and Lightning and how much is whereas decentralized and distributed as possible, where we try as best as we can to include privacy as a default in every layer of the, stack, etc., etc.

I can tell you, that explicit and state that a bunch of the proof of stake investors envision is all of the biggest citadel securities was famously, everybody learned that they do the pay for order flow on Robinhood stuff. Explicitly, the goal for the proof of stake validators is for citadel securities to be a proof of stake validator, and you have to pay them some form of institutionalized MEV in order to get your trade in on Eth 2.0, Solana, you name it.

That is the end state that they’re building towards, which I think is jus, philosophically, hilariously unaligned with what we’re trying to do here. Rather than institutionalize and enshrine the current power structure, build an entirely new one from the ground up that, the respect, social opportunity and decentralization. Just an interesting point to point out.

[00:40:23] LN: I think, you can make an argument today that the fees that you paid of miners to get them included in block is extractable value, right? I haven’t read this paper that it’s off, the amount of stuff. It sounds like I’ve got a little more reading to do there. I think that in one light, you can look at any fees that you pay to miners as bribes, right? You’re basically driving a miner to put your transactions to the block and you’re competing with every other person attempting to get a transaction on block at the same time with you, to be basically, win out that block space.

If one of those, let’s say there’s someone who’s got a transaction, and they’re paying a little bit less of a bribe than you are, but they have a good relationship with a miner, then they could definitely maybe pull on some social capital to tell the asset miner to include it, your third transaction in a block, and such that the next block is that miner has this transaction that doesn’t pay what’s considered the going bribery for getting your transactions into a block.

I think that by design, I think that Bitcoin is miner extractable value system. There’s a lot of different things at play here that I think people have pointed out, which I like really great, important, such as how decentralized you are really matters. Because if there was a centralized miner, who got to decide the ultimate arbitrator of who goes in what block, and when then you would basically, at their whim, where because there’s a healthy competition and you merch it between a bunch of different miners, one miner can’t really prevent your transaction from getting mined. You hoping that there’s another miner somewhere on the system that’s still playing by the most fees that they can get rules, so to speak.

You can get your transaction mined eventually by one of these honest miners, honest being the only extractable value that they accept is this wasn’t built into the protocol, which is the mining fees. I think at this point, we’re still – we’re a little far away from Lightning, so I apologize. Hopefully, it’s interesting enough. I don’t know.

[00:42:24] P: I think it’s fascinating. How’s everybody else feeling?

[00:42:27] V: I’m feeling very adversarial. How do I make sure I get my, I guess, commitment transaction finalized and mined? Not broadcast it, but directly submitted into a block, to a miner out of band?

[00:42:44] RG: Yeah. You got to bribe them. That’s what flash bots is all about.

[00:42:47] P: Accelerators.

[00:42:48] V: Sweet. Wash always can’t phase me?

[00:42:51] RG: Yeah, bro. All the miners live in Austin now. You just got to knock on their door and be like, “Hey, man. Block 700,056.”

[00:42:58] P: Get it done. Yeah, totally.

[00:43:01] V: Texas has a monopoly on block space, or block weight. Heard it here first.

[00:43:05] P: It’s funny, I’ve been into pay pays for a while now, but people love to say, “Oh, Ethereum based NFTs, that’s the first thing ever.” It’s all total horseshit, because of course, this has been done on Bitcoin for ages. It’s really funny, because, of course, NFTs on Bitcoin, which were the first NFTs, and I hate that term, are they’re on the counterparty protocol, which some top of Bitcoin is a layer one. They’re all just Bitcoin transactions.

If there’s a specific pay pay that you really want, you can go look on the counterparty chain, which is of course, just on top of the Bitcoin chain. It’s not even a layer two. You can just increase your fee above what the person who has already bid against you has done, and just shove your transaction through ahead of them, which is not the same thing as what you’re talking about, Lisa, but reminds of it.

[00:43:47] JC: Did you say pay?

[00:43:49] P: Somebody was just making fun of me for this. Yeah. I say pay, as opposed to Pepe. Apparently, that’s not how you’re supposed to say it.

[00:43:55] V: He’s starting a new app called Pay.

[00:43:58] P: That’s P-P-A-Y. You send your money to it and you never see it again. That’s how that works. It’s good stuff. Okay.

[00:44:04] JC: Called Ppay.

[00:44:08] P: I was joking, it would be called PP. Cool. What else? What else we got?

[00:44:12] JC: Still taking the piss, P.

[00:44:14] P: Never. That’s literally not possible for me.

[00:44:16] RG: I showed up late, but what were – I guess, we already did all the El Salvador stuff. My take on El Salvador is man, it’s not perfect, but all things together, I was hugely impressed with how smooth everything rolled out. From the companies on the ground, how prepared specifically, the private businesses that are operating in there, the open nodes, the Alex Mercados, everybody was ready.

They weren’t hugely deluged, and nobody had nodes going offline. There was for a brief moment, people’s nodes were getting dossed, but they were able to figure it out and get up and running. Yes, it’s not the perfect self-custody, everybody runs their own node future that we’re all hoping for. All told, I was pretty impressed.

[00:44:58] V: I was pretty impressed, too, that they responded so quickly to Matt Aalborg and Keith. They fixed it. I thought that was a funny troll.

[00:45:06] RG: That was awesome. Yeah. There are smart people down there that are paying attention, that are trying to do a good job. Frankly, I was worried. I didn’t know if Chivo was even going to launch Lightning support at all. It hasn’t been perfect and definitely, there’s a lot of private terms, etc. etc. I think, it’s a huge testament to everybody that’s been working on this network for three years, that the first main transaction was very end of 2017, very start of 2018.

Then three and a half years later, we have a full nation states, slowly being onboarded. People say, that Lightning is moving too slow. I think, we’ve done a pretty good job. When I say we, people who actually are building the thing.

[00:45:43] P: Now, you’re not giving yourself enough credit, man. I also want to welcome Artur to the stage, Co-Founder of Paxful. How’s it going it, man?”

[00:45:48] AS: Oh, hey. What’s up guys? Thanks for inviting. It’s 2:00 A.M. here. I’m in Estonia in north Europe. Good discussion here. I like it. I like where’s it going. Look, we’re going to have a big news tomorrow. Our PR team told that we’re not allowed to say, but I guess we can all guess what it’s going to be about. Tomorrow, we’re going to make it public. Thanks for Lightning Labs team to help us along the way.

We actually, will get a faster than crack and we’re going to be one of the big exchanges to release you know what. Oh, and look, regarding El Salvador, look, we have a guy on the grounds. He says same thing as on Reddit Bitcoin, that Chivo is not working. People don’t like the government app. It’s tracking user PII data, all that stuff. It’s our chance to build them better products, because, okay, there’s this open nodes, non-custodial solution. That is awesome for the merchants, but there’s space for more, for Paxful wallets, for POS merchant solutions, for example, there’s a guy, he has 20 shoe stores. He says, “Oh, I want to accept Bitcoin, or Lightning, but I want to cash it out into my bank account.”

That’s what we need to provide them, while a wallet is still not great. It’s buggy. Some people simply don’t want to use it. I still find it super exciting that where the El Salvador is going to be in five to 10 years. Because honestly, you guys just talk now about this NFT and all this other blockchains, like Solana and Ethereum. What’s happening there, I did play around. I confess. Eventually, yeah. These are fun blockchains, right? They’re fast. Look, I’m not going to show anything. Look, eventually things will move to Lightning, because Bitcoin is still the most fairly distributed, no prima, nothing. People will realize, it’s much faster transaction per seconds, like what? 25 million transactions per second in Lightning. Imagine smart contracts on that.

It will be literally less than one SATs price for every transaction then. I don’t know how long. It’s going to take time. Look, I do bet that all this other blockchains will be obsolete. That’s my long-term prediction, the world we’re going to live in.

[00:48:08] P: Yeah, I agree. I think that the benefits of Bitcoin and Lightning and all the exciting stuff that’s happening there, RGB protocol, see if that actually does what it’s supposed to do in terms of NFTs, but I think it’s all going to roll back into Bitcoin. It’s interesting.

[00:48:20] JC: I also agree that shitcoins, like Solana and NFT stuff are all garbage and everybody should pay attention to. I agree with that, too.

[00:48:27] P: Yup. A 100%.

[00:48:29] RG: It’s one of those things where you think about the network effects and the real changes that we’re making in new people’s lives, just by allowing instant and at Lightning fee rates. Ruben says from the US to El Salvador, allowing these people to be banked and not have to deal with physical cash anymore. It’s a much longer-term play than the short-term gains of flipping NFTs, but just in the trenches the protocol and it trenches Bitcoin and the psyche of the world and in people’s daily lives in just such a different deeper way. Seeing this stuff play out and seeing all the people that have started their own businesses on Paxful, and have given themselves jobs and employed other people will see the platform that Artur has provided for them. It makes such a bigger difference and it will be such a longer lasting impact.

I think, you see, the evidence of that and how quickly Nigeria and the massive surge in peer-to-peer trading volume in Nigeria, and how many people running Bitcoin there over the last couple of years. They’ve contributed, I think, a very large amount of that actually. It’s stuff that [inaudible 00:49:33] just going to compound. They’re just going to keep growing as a protocol.

One thing, more actually the other day that I thought was like, they really stuck with me, is this fiat payment rails are only going to get worse. They’re only going to get more politicized, only having to have higher fees. Lightning payment rails are only going to get better. They’re the worst that they’ve ever been today, and there’s tons of brain power involved in making them better and better. I think, we’re in a really good spot right now and the gap that we have, a little competition is only increasing.

[00:50:02] AS: Yeah. Look, I’ll bring an example. Ryan, yeah, you said it well. Basically, on Paxful, you could be doing the same thing you can do with Lightning already for the past six years. We’re not the first one. How it works. You can buy Bitcoin in US for PayPal, and then right away, sell that Bitcoin in Japan for the bank transfer, but you do that within one platform.

Now with Lightning, that Jack Mallers is saying, and others that basically, different apps are talking to each other openly. Before, it was flat, or plaid, however you’d say. It was connecting the banks, different banks. Now, it’s Lightning is connecting different wallets that have a fiat on-ramp and fiat off-ramp in whatever jurisdiction. That means Swift will be obsolete. You don’t even need that. You would just need a local wallet in US. You do the instant on-ramp and then you do the cash out in Africa, for example, in Nigeria, in Kenya with the local wallet there.

That means the payment networks, the local ones will be a ruling, right? You don’t need Swift for that, because it’s an on-ramp with the local payment network in one country. Then off-ramp with the local payment network in another country, M-Pesa in Kenya, ACH or Fed Wire in US, or whatever hacks people have done that the technology behind Zell, I know some companies have basically, reverse engineered Zell technology and that’s how they have this instant payouts.

[00:51:32] P: John, speak your piece, my friend.

[00:51:34] JC: I have nothing to say. What do you mean?

[00:51:38] P: You just tweeted a hilarious tweet at. What was that in response to?

[00:51:41] JC: I didn’t just tweet it. I tweeted it five minutes ago. No, I just think that we should be able to tweet the shit emoji when people are talking about shitcoins.

[00:51:48] P: Fair enough. Fair enough. I agree.

[00:51:50] AS: Look, guys. Here’s one point. I had a talk with one guy who was a FinTech developer. He said, centralized services are usually faster, even the Swift should be faster, but because of all the regulations or whatever, overhead on top, it’s slower than Lightning. He’s correct. Centralized services should be faster than decentralized. Lightning is faster. It works against that logic.

[00:52:12] W: Question.

[00:52:13] P: Go for it. Walton.

[00:52:15] W: If a Lightning node runner is already using Thor and Watchtowers, what can they do to improve the privacy and security respectively?

[00:52:25] P: I think, the biggest things are just not doing, we do in PlebNet and not docs – the fact that we’ve all associated our telegram handles with our nodes, or register on Amboss, or things like that massively degrades your privacy. If you’re really focused on privacy, or do it like Jimmy Song, or any number of other people who are running Lightning nodes do, which is they run large Lightning nodes, but they just don’t associate them with their identities in any way.

[00:52:46] RG: Yeah. I think, one additional thing that can really help is actually, the node that has all the public channels have that just be a gateway, or a proxy node that’s sitting in front of your real node. It just has a private channel with your proxy node. The only node that you’re your real node where you’re actually receiving the payments to, and creating invoices and stuff like that and making payments out of, never broadcasts on the gossip network. You have this fake proxy network, proxy node in front of it that does all of the public cost of communications. I think that’s a pretty good architecture, if you want to keep your real node where your application logic is done totally private and unannounced from the rest of the network.

They’re like, your only vulnerability is you would have to do some work to keep your real, like the application node, not the gateway node to keep that pokey from being listed in the invoice, with big TLC interceptor and a couple of other things. You can mask that, but it is hard.


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[00:57:44] P: All right. What else? What else we got?

[00:57:47] M: Hello. Hey, can I speak?

[00:57:48] P: Yes, I forgot you were there. I’m sorry, Miguel. Yes, please. You are focused on El Salvador. Give us your thoughts.

[00:57:53] M: Yeah, in El Salvador. Yeah. I am very bullish on Bitcoin, but because you were talking about the Chivo app and everything, right?

[00:58:02] P: We were originally, yeah.

[00:58:04] M: Even though I’m super bullish on Bitcoin, I don’t have the Chivo app. First, because it has not been enabled on my phone. I have a Note 10 and I can download the app. That sucks. Regardless of if I cannot download the app or not, I’m not using the Chivo app, because I don’t trust the government. I think that’s one of the reasons as to why people is in Bitcoin, because they don’t trust the institutions.

I wanted to ask you people in the space, there is a solution that would be similar to Chivo app in the sense that it’s decentralized, and that you have your own keys. Also, you can exchange Bitcoin for whatever token, or fiat, or fiat token that you can, because you can supposedly do that on the Chivo app. Also, that supports Lightning payments. Because, for example, I have Blue wallet, but again, that’s the centralized in Lightning.

I can convert my Bitcoin to dollars on Blue. Or for example, I have trust wallet in which it’s decentralized, and at the same time, I can exchange my Bitcoin for whatever I want, but I don’t have Lightning, or I could use Chivo, but it’s centralized. It’s not your keys, not your crypto. I have to rely on the government. is there something out there that could meet those requirements? If not, I think that, because we have been talking about the future.

[00:59:34] P: Wait. Sorry. Can you restate the requirements that you’re interested in?

[00:59:37] S: I think, what you’re looking for would be a Lightning wallet that had stablecoin support and a marketplace where people could do atomic swaps between say, Bitcoin and tethered USD.

[00:59:50] M: Yeah. That is pretty much what I’m asking for.

[00:59:53] P: John, did you just wave to signal agreement, or did you had a comment?

[00:59:58] JC: Just waving my hands.

[01:00:00] P: Got it. Yeah. I don’t know of any that are that offer that support. Does anyone else?

[01:00:05] JC: Shinobi’s totally right. You need exactly what you described. I do think what you described should exist. I don’t think it exists, other than maybe somewhat indirectly through a shitcoin wallet. There are multi-coin wallets that have also have stablecoins and stuff, but they’re not really doing a dedicated Bitcoin experience, even if you – generally, when you’re asking for the capability to convert your Bitcoin and your Lightning Bitcoin into dollars somehow, you’re going to need a service, which means that you’re going to have to trust a service with your money, while they’re convert it.

[01:00:34] M: I thought, the point of somehow Bitcoin was for it to be a trustless system. For example, even if you’re using Lightning, you’re not really trusting anybody.

[01:00:46] JC: You didn’t ask for trustless. You asked for dollars.

[01:00:49] P: Lightning is not fully trustless. There’s trade-offs at every step. If you want fully trustless, the most secure, then you’re going to go with layer one on-chain transactions, but then there’s trade-offs there. If you’re willing to give up a slight amount of that –

[01:01:01] JC: Generally speaking, it’s a 100% possible to hold US dollars in a trustless way digitally.

[01:01:06] P: There you go.

[01:01:08] M: Yeah. That sort of makes sense. Yeah. I guess, since donors come from institutions, we have to trust them, which is the opposite for Bitcoin. I guess, that’s why we’re here. That’s good.

[01:01:19] JC: Yeah. You need to trust your custodian as a bank, or you trust Tether to hold the dollars they say they hold, etc. You end up, to have a digital dollar, you have to trust.

[01:01:27] M: Okay. Yeah. That makes sense. I just put it out there as a business idea, or a map idea. If you can manage to have all those features, that would be great for the feature.

[01:01:39] JC: I think, it’s an excellent idea.

[01:01:40] RG: Yeah John, I think you should run with that. That’s a really good idea.

[01:01:44] M: Because you have all of it, right? You have the Dexus, you have the decentralized wallets and you have the Lightning wallet. It’s just about putting it altogether in one place, which to me would be really almost as if everybody’s running their own node. Maybe that doesn’t necessarily let you run it by yourself, because that requires technical things. So that it does it for you, just like Muun wallet does. Well, the way I see it, that would be the future for Bitcoin for me.

I live in the country where it’s legal. Because that way, it really is trustless. It really is something that I can also, yeah, for the long-term you can HODL. For everyday transactions, you can’t really use Bitcoin for everyday transactions. If you’re losing money day-to-day, unless –

[01:02:34] P: Wait, sorry. Why can’t you use Bitcoin over Lightning for everyday transactions?

[01:02:37] M: In the sense, let’s say that, I don’t know. I want to get a Big Mac for $5 and I only have $6 on my Bitcoin Lightning account, then I don’t know. Bitcoin goes down 10% and I couldn’t change it, because I don’t have anything to change it to.

[01:02:55] P: That’s not something that needs to be supported directly in a wallet. If you want to exchange it, it would be cool. I agree. It’d be a pretty awesome idea. I think those are separate.

[01:03:01] JC: I think, Miguel, if everybody, even in El Salvador, and I don’t care how poor anybody is there. Even if they just use Bitcoin for a little while, you’ll eventually get enough Bitcoin, if you use it as your form of savings and you can save any amount. You’ll eventually get to accumulate an amount where the volatility will matter less and less, and you’ll be more and more comfortable with holding the Bitcoin.

I think over the decades also, the Bitcoin will just become less volatile overall. Yeah, volatility is an issue. That is a huge reason why stablecoins are popular. That’s why they’re also very popular in countries that have bad stability for their own currency, a lot of high inflation and things like this. I think that you are correct, that the answer would be to try to make this better than current trusted solutions by incorporating atomic swaps and coordinating atomic swaps across people in private ways.

We’re still some ways away from that. There were a lot of people working on adding capabilities for tokens and to be on Lightning. There are multiple projects trying to do that. There are multiple trial projects trying to make atomic swapping better in general for Bitcoiners. Then coordinating all of that stuff in the future, but it’s not here now. I think that you have to be patient and you’ll see it come.

[01:04:12] M: All right. Thank you. That’s great insight. I guess, I’ll just wait. I’ll just HODL for now. Because I do want to use the Lightning to pay for stuff right now. I was so excited about it, but at the same time, I don’t feel like, unless I use the Chivo app, I feel I cannot do it, because I don’t have a Lightning wallet that I could hedge against the volatility.

[01:04:33] RG: Miguel, I do think, I don’t know if they have it live yet, but I do know that the Bitcoin Beach wallet is working on allowing you to hold a USD denominated balance in their wallet. I don’t know if it’s live yet. I do know that they’re working on it, though. You might try the Bitcoin Beach wallet and see if that’s available.

[01:04:50] M: All right. Yeah.

[01:04:51] JC: Since you specifically mentioned hedging your volatility, since you word it that way, we would probably should mention DLCs, people like atomic beds and tonic. I think, become atonic loans now. Because they’re trying to make a product that would allow you to specifically hedge through having a bet construction using Bitcoin. That might be a way that you could at least lock in a Bitcoin price at a certain dollar value, entering one of those contracts. Of course, there is some risk there, but you can control the risk.

[01:05:19] P: Yeah, DLCs are really fascinating. I can’t wait until we have them over Lightning.

[01:05:24] M: Maybe I could rephrase this question. Maybe you’ll get more ideas. Maybe if you work –

[01:05:30] P: Go ahead. I’m going to – Miguel, I’m just going to say, one more – I’m going to ask you to rephrase it one more time and then I want to move us on, because we don’t have too much more time. Go ahead.

[01:05:38] M: Yeah, of course. If your salary was being paid in Bitcoin right now, what would you do? You have a salary. You work for money.

[01:05:48] JC: I’ll tell you exactly what I’d do.

[01:05:50] M: [Inaudible 01:05:50] in USD, or whatever – yeah, money that you –

[01:05:54] P: Ryan go ahead. I think, Miguel, we got the concept. Basically, if you’re paid in BTC, what do you do if you need dollars to interact with your life? Ryan, you were going to chime in.

[01:06:02] JC: It was me.

[01:06:02] P: Oh, I’m sorry, John. Go ahead, John.

[01:06:07] JC: I’ve been getting paid in Bitcoin for, I don’t know, three years or something like this. I don’t remember, three or four years. Then, I was living off of Bitcoin before that. Very simple formula. You get paid, you decide how much money you need to spend until the next time you get paid in dollars, you sell that much the day you get paid, so that way you don’t think about whether you sold it right or the wrong price, because you don’t want to be a trader, because that’s a bad idea.

You just have only enough cash to live for month-to-month. Or, if you have a little more money and you have a little better savings, you maybe save two months out, or you save two months out, plus some emergency amount that you think you just want to have handy in case something happens. You just maneuver this way. Then if you can, if you want to start optimizing and keeping things out of dollars, you can also do things, like buy gift cards for whatever bills, or sorry, not bills, but cellphone services and different shopping you might do online. That way, you can stay outside of banking, if you want to.

[01:07:01] P: There you go.

[01:07:01] M: Thank you. That is actually great. I’m new to this space, right? This helps a lot. Thank you, guys, for listening and answering my questions, because this is great. Thanks, John. Because your experience is going to help me decide what I’m doing now in the future. Thank you.

[01:07:19] P: Absolutely, Miguel. I know, you and I have chatted back and forth in the back-end and a lot of the conversations about El Salvador. Definitely appreciate you jumping up and asking questions. They’re important ones. Ryan, you I don’t think, answered the question of what are some things that you are particularly excited about related to Lightning, or that you’re angry about, or that do fall asleep crying about.

[01:07:41] RG: I’m particularly excited, just about adoption, about all the new people that are getting into the space. I think, we’ve been hammering in our blog and all sorts of stuff on the PlebNet all year. All of the new people that are getting excited about Lightning with this price run-up, I think, it’s really exciting. It’s much needed. I can tell you, not only am I excited as a business development person, but the protocol developers are excited that we have new blood and new ideas, new people that are testing out their software and are using it on a daily basis. Particularly, the expansion into Latin America, not just El Salvador, but Brazil, Argentina, Chile West Africa, Vietnam and Paxful in Nigeria, Ghana.

Just getting more people into the space, getting more people interested, which inevitably leads to more developers, into more startups. I’m just really excited for the unknowns that are going to pop up over the next six months, that are come out of going to come out of this surge of adoption. There’s Lightning Labs and Blockstream, Sync, Square Crypto. Of course, we have really long-time horizons that we’re thinking about, and the stuff that we’re excited about over the next three to five years, in terms of protocol development.

Bringing in new people, enthusiastic people, talented people, young people that want to change things up and make them work, and throw a wrench into those plans, I think, is really exciting. Especially, protocol developers, I think they would even admit, have a tendency to get a little ivory tower, especially with the long-time horizon, and then thinking about the perfect protocol position and rapid rabbit holing and incentives, and all this stuff. Having real people use your real technology on a daily basis to buy coffee and stuff like that, just forces you to focus on the here and now about, what can we do to make sure that this El Salvador experiment works? What can we do to make sure that people with four or five-year-old Android phones in Ghana can run their own nodes? What can we do to solve these problems for people today, I think is really exciting and we’ll pay just enormous dividends going forward.

[01:09:42] P: I love it. I love it. Yeah. I’m super bullish on Lightning adoption and people getting more and more excited about it. Walton, a bunch of us all got together and started PlebNet, because we were super excited. We wanted to learn about it together and it grew into this much larger thing. I think, that I’m really excited about the developments there in terms of running neutrino nodes on your phone, and all of the platforms that are out there that make it easier and easier to run your own Lightning node. These are heady times. It’s quite amazing.

I’m also particularly excited about, there’s a new series that Lisa and the folks over at Blockstream are releasing about c-lightning development and the plugin architecture there. There’s some really awesome stuff being done on LND. It’s an exciting time to be running a Lightning node and to be seeing Lightning adoption increase dramatically all over the world.

[01:10:26] RG: One other thing that is really much more concrete, the answer I just gave was very flowery and high-level. One thing that I’ve always desperately wanted is death to subscription paywalls. I think, now, we have the infrastructure for the Lightning Network at a good enough place, where you’re going to start seeing a pro tip. I hope I’m not leaking anything. I don’t think that I am. If you download the Zebedee browser extension and go to Andre Neves’ profile page on Twitter, it’s pretty cool. I think, we’re going to see a lot more Lightning tipping, embedded natively in the web, like that showing up pretty soon.

[01:11:05] P: I did not know that they had a Chrome extension. Yeah. The guys at Zebedee are doing some incredible stuff.

[01:11:10] RG: Check it out. It’s public, because they’ve tweeted about it a little bit. If you look at my profile pic with the little Lightning and then my Zebedee Lightning address thing, again, there’s of course, concerns privacy-wise here and brings them TLS, all that stuff, yada, yada, yada, just the experience of being able to browse somebody’s Twitter page and being able to tip them directly over Lightning with all I had to put in there was just this, I don’t know, 20 characters or something like that. I think, it’s going to blow people’s minds as far as how far the infrastructure has come. I don’t know when they’re going to make a big announcement about it, but it’s working and I think it’s going to be the next couple days.

[01:11:48] P: Wait. That is so cool. Just to be clear, what did you have to change? You just basically put your Zebedee wallet address or something in your profile?

[01:11:55] RG: Yup. Yeah. My Lightning address, my Zebedee wallet. Yeah. I tested it out earlier. If you browse to on the browser, if you go to Andre specific, his page, I know it works for his page, because I looked at it and a little Lightning tip button pops up, if you have the Chrome extension installed. I expect, that will be rolled out for more Chrome extensions going forward.

[01:12:14] P: Basically, the Chrome extension scans the page, finds the Zebedee address and then automatically inserts a button, so that you can just tip him really easily?

[01:12:21] RG: Yeah. It’s fucking sweet.

[01:12:22] P: It’s pretty neat. Yeah, I think, the user experience for a lot of these tools has been, like a software engineer, I’m like, “Oh, no problem. I’ll SSH into my machine and smash my head against the wall for three hours before figuring it out.” Obviously, for adoption, we need much smoother experiences. I think, a lot of the full node, and Chino node, phone wallets that have these really beautiful experiences and this stuff is really important. It’s exciting.

[01:12:44] RG: Yeah. The Lighting address thing, too, again, it has its qualms and its trade-offs, etc., etc. Just the experience of having getting rid of the noises and just having a human readable Lightning address, I think there’s just a game-changer for normies, and making it approachable and making it something, I don’t know. Andre has been just producing all kinds of crazy, amazing new stuff in the last two months. I don’t know what’s gotten into his wheaties in the morning, but he’s just been shipping all kinds of new features. Excited to see what they have next.

[01:13:14] P: I will say, I’ve been super excited about the BOLT 12 stuff that Rusty Russell is working on. We did a Space with him a little while back. I think, BOLT 12 is going to be game-changing as well.

[01:13:24] RG: Yeah. There’s that flow. Anything with the end state of what’s good for users is this permanent reusable invoice, or static address, static QR code type thing. However, the development community, that decision is far beyond my pay grade of which is the proposal ends up going forward. However, we get to that end state, where you can have, ideally, a privacy preserving, but in practical matters, just a static, a Lightning address, I think is just huge for adoption. That’s been the dream of Internet-based micropayments for forever, because you can just put an address out there, like your email address, and people can just tip you for content that you posted months ago.

[01:14:02] P: All right. I want to try to end us relatively on time today, which will be, I don’t want to say a first, but it’s very infrequent. Let’s go around for the speakers that are up here and give some closing thoughts. Brian, you want to give us your closing thoughts? Although, you just did, but –

[01:14:17] S: I know. I just did. I’ll be brief though. Things are going well, but we need more help. We need more developers. We need more people doing business development, and we need more people doing marketing. If you’re sitting on the sidelines listening to this, and you are passionate about Lightning, like I think, literally every single Lightning company is hiring. I think, literally, every Bitcoin company is hiring right now. It’s time to quit your fiat job. It’s time to come work on Bitcoin full-time. If they have that resume and CV, and start applying.

We need to help, and now is the time to jump in. I can tell you, having joined not a Bitcoin company, but a crypto company in spring of 2018, once the bear market kicks in, those job posting disappear in a hurry. They don’t come back for a couple years. If you’re at all interested in working on Bitcoin full-time and you have any work close to the requisite skills, strongly recommend applying immediately. Even just to say that you did it, because we need more help. People are hiring and yeah, it’s a very exciting time to be working on Bitcoin.

[01:15:14] P: I could not agree with you more. I literally just did exactly that. Exciting stuff.

[01:15:18] S: By the way.

[01:15:19] P: Thank you. Thank you. I’m super pumped. The conference is going to be amazing. Walton.

[01:15:25] W: Yeah. I think, we’ve mentioned PlebNet a couple of times, but I don’t think we mentioned how people can find PlebNet. What I’d like to remind, is that they can simply go to That is Thank you. I’m done speaking.

[01:15:43] P: That’s an internal joke, because we’re all so fixated on privacy and OPSEC and stuff. We never tell anybody the number of Bitcoin we have, things like that. Then, when we started PlebNet, we were all like, “All right, here’s my node. Check on my liquidity.” We were just throwing channels around. The joke was, we called the KYC jelly, because it was funny. Artur, what are your thoughts?

[01:16:04] AS: Yeah, sure. It was a really good discussion. Ryan said, we are so early. It’s time to join the Lightning space, the Bitcoin space. Forget all the shitcoins and what is happening. They’re all that circle jerk with the farming, and so on. That’s not adding any value to the world. This thing, what we’re doing now is actually, building a better world.

Speaking of that, we are so early, which means that, honestly, the infrastructure is getting there. There’s some good development happening, but we are so early. It’s like 2013 in Bitcoin. Remember blockchain info got their first API? When I used it first time, it was get address and get merchants. They were the only API that was available. It was so clunky. I remember that. I’m not saying we’re in a similar situation now. We’re in a much better situation. Again, the user experience, the developer experience needs to be improved.

I understand, it takes time. We’re all building that. That’s the one thing, right? The infrastructure layer, we are building now. The second is Miguel said, he needs a useful product. One thing is we talk about tech here. Another thing is we need to talk how to solve actual problems for users, for people. How do we basically, abstract out Lightning and Bitcoin for people? I know, it sounds cheesy to we abstract it out, but we should give people choice. If they want to – I see said, Miguel, he wants to transact in some stable value, like USD. Let’s say, it’s a temporary thing, until the post fee at world, where Bitcoin Lightning will be the world currency, we have to think here as well, how do we make Lightning and Bitcoin without wallets, but a physical cash, so you can exchange with each other cash? Like in a movie Time, where you can –

[01:18:00] P: Wait, wait, wait, wait. You said two things I think are interesting. One, the idea that there needs to be physical representations of Lightning.

[01:18:07] AS: Exactly. Physical cash.

[01:18:09] P: I disagree, man.

[01:18:10] AS: No? Look, the electronic wallets, it’s durability. You have to solve all these things. I was thinking, NFC and E Inc., and then you can tap to each other. Basically, you don’t need Internet connection. That is the point. Because look, I was now in Nigeria, in these far villages and they have this POS systems. The agents who exchange cash with them, mobile money. We need solutions for them.

Okay, there’s Blockstream. They launched the satellite. That’s awesome. I’m sure they’re thinking ahead as well, but you don’t need Internet to connect to the Bitcoin blockchain with the Blockstream satellite, they will do the same with Lightning. The solution will come there. There’s a need. I see that. Hundred SATs on a physical form, or whatever material is going to be, like [inaudible 01:18:56], NFC or something. I have no idea, but there will be something.

[01:19:01] JC: Any physical form Bitcoin will end up being essentially, a form of hardware wallet. I think, the closest we’ve got so far is open dime, where you have this walkable and detectable, if it’s been on lock, little USB device that has Bitcoin on it. You can use that like cash.

[01:19:17] AS: Interesting. Yeah. There has to be a guarantee that you have not used it. I can just look at –

[01:19:22] JC: The only guarantee is if you actually connect to the network. You never know for sure, until you connect to the network.

[01:19:28] P: All right, everyone. I’m going to close this out for the day. Thank you, again, so much for joining, and I’ll see you all next week.


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MEV Protection Project Alchemist Rallies on Deal Rumors

Key Takeaways

  • Alchemist’s MIST token has rallied on rumors of a new partnership with Uniswap.
  • The rumors circulated after a video showing a Uniswap v3 interface with the mistX front-running protection feature was posted to Reddit.
  • mistX, the protocol’s flagship product, helps protects against MEV attacks on DEXs.

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MIST, the native token of the MEV protection project Alchemist, has rallied after rumors of a partnership with the decentralized exchange Uniswap circulated online.

Alchemist Rumored To Partner With Uniswap

Alchemist’s native token has rallied on rumors of a new partnership with Uniswap.

According to social media reports, Uniswap may soon be deploying Alchemist’s mistX product, a popular solution for protection against Miner Extractable Value (MEV). MEV is a phenomenon where by reordering transactions in the next on-chain block, miners can front-run trades on Ethereum’s decentralized exchanges (DEXs).

The price rally followed a video posted to Reddit that showed a privately hosted Uniswap v3 interface with a front-running protection feature that read “powered by Flashbots and mistX.”


By serving as an effective solution against MEV, the Alchemist’s mistX product has hit over $311 million in volume traded over the course of five months since it went live in May 2021.

The Uniswap partnership reports coupled with the protocol’s growing use of has driven a strong rally for Alchemist’s MIST token, which is up 68% since Oct. 1 and is currently trading at about $130.

Source: CoinGecko

While nothing has been made official as of now, the team at Alchemist and Don Vincenzo, a core team member, have further stoked the rumors surrounding the partnership by hinting that a major announcement is soon to follow.

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mistX, one of Alchemist’s flagship products, uses Flashbots technology to protect DEX traders from Miner Extractable Value (MEV). MEV has become a major concern for the Ethereum blockchain, allowing miners to practically “steal” millions of dollars each day. With rising instances of front-running, the need for MEV protection has grown proportionally.

Simply put, mistX works as a layer on top of DEXs and routes transactions through Flashbots, a type of private communication protocol between DEXs and miners that aims to protect against MEV attacks.

If the rumors are true, a partnership with Alchemist could improve trades for Uniswap users, the largest DEX by daily trading volume. As per reports, Uniswap traders are vulnerable to MEV attacks as no solution is currently in place.

Other projects such as Gnosis’ CowSwap and Eden Network have also deployed MEV protection solutions, but with different approaches. For example, another leading DEX, Sushi, has already integrated Eden Network to protect its users from MEV. A Partnership with a large DEX like Uniswap could give Alchemist a further boost to the fees it generates.

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What Is MEV? Ethereum’s Invisible Tax Explained

Key Takeaways

  • MEV stands for “Miner Extractable Value” or “Maximal Extractable Value.”
  • It refers to the extraction of value from Ethereum users by reordering, inserting, and censoring transactions within blocks.
  • MEV is one of Ethereum’s biggest issues, with more than $689 million extracted from users of the network year-to-date.

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By leveraging their discretionary power to sequence transactions within blocks, miners can extract value from decentralized application users on Ethereum, greatly diminishing the user experience and threatening the stability of the network.

MEV, The Invisible Tax On Ethereum Users

MEV is an abbreviation of “Miner Extractable Value” or “Maximal Extractable Value.” It refers to profits that can be made by extracting value from Ethereum users by reordering, inserting or censoring transactions within blocks being produced. It typically affects DeFi users interacting with automated market makers and other apps. 

Interestingly, the problem of MEV in Ethereum was first identified in 2014—a year before Ethereum launched—by an analyst coder and long-time algorithmic trader operating under the pseudonym Pmcgoohan. 

Horrified by what happened in 2008 and the outfall of the global financial crisis, when Pmcgoohan first heard about Ethereum and the idea of a programmable blockchain promising distributed and equitable markets, he became enamored. To use his own words, it “blew his mind,” and he was “so excited about it,” but when he looked at Ethereum’s pre-Genesis draft documents, he was taken aback to find a critical flaw. Pcgoohan recognized that miners had total control of the transaction inclusion and ordering process, which meant that they could leverage this power to extract value from unsuspecting users of the protocol went it went live. 

While some instantly recognized the shortfalls of Ethereum’s proposed design, Pmcgoohan was, unfortunately, ahead of his time, and his warning fell largely on deaf ears. That is until, in 2019, a group of researchers highlighted the issue by publishing a paper called Flash Boys 2.0, where the “MEV” term was first coined to describe the problem Pmcgoohan had referenced years earlier.

Subsequently, Georgios Konstantopoulos’ and Dan Robinson’s Ethereum is a Dark Forest, and Samczsun’s Escaping the Dark Forest articles, published in Aug. and Sep. 2020 respectively, cemented MEV as a fundamental concept in crypto-economics and highlighted its importance as one of the most challenging and pressing issues the Ethereum research community faces today. 

These texts revealed that MEV was not merely a theoretical issue, but a real phenomenon already occurring at a significant scale with concerning consequences for Ethereum users.

Why MEV Occurs

In Ethereum, miners are responsible for selecting and aggregating transactions into blocks. Crucially, they have full autonomy in deciding which transactions from the mempool—an off-chain space where pending transactions await confirmation—they’ll include in the blocks they mine. 

As miners, validators, and sequencers optimize for profit, they tend to select and order transactions by the highest gas price or transaction fees. However, the protocol does not require transactions to be ordered according to fees. Miners can leverage their discretionary ability to reorder transactions to extract additional profits from users. This “irregular” stream of revenue is MEV. 

Although MEV is most frequently associated with miners, it is neither a Proof-of-Work nor an Ethereum-exclusive issue. Moreover, “miner extractable value” is a somewhat misleading term. In reality, the majority of MEV extraction today comes from so-called “searchers”—usually arbitrage traders and bot operators—actively seeking and identifying MEV opportunities on-chain and capturing them in different ways, whereas miners only indirectly profit from these traders’ transaction fees. MEV exists on all smart contract-enabled blockchains with a party responsible for transaction ordering, including validators in Proof-of-Stake-based systems like Ethereum 2.0 and rollup providers on Optimistic Rollups.

Understanding the MEV Game 

The best way to understand the MEV game is to look at it through the lens of the key players, including miners, searchers, users, decentralized applications, and protocol developers.

The miners or block producers are responsible for sequencing transactions and deciding which transactions to include in blocks and in what order. Miners can profit from the MEV game in two ways: first, by selling scarce block space to non-miner MEV extractors through so-called Priority Gas Auctions (PGA) in exchange for exorbitant transaction fees, and by capturing MEV directly through reordering, including, or censoring transactions to profit from on-chain liquidation or arbitrage opportunities for themselves.

MEV also involves the end-users, such as people taking out on-chain loans or trading on decentralized exchanges. Users are the most exploited party in this game as they emit some amount of value that can be captured by miners and non-miner MEV extractors.

Decentralized applications and protocol developers play an auxiliary role. The former create MEV opportunities through their design and the incentives they produce, while the latter establishes the game’s base rules such as giving block producers power to sequence transactions, which is what makes MEV possible. 

Finally, central to the MEV game are the searchers or the DeFi traders and bot operators who seek to identify MEV opportunities and capture them in different ways. The two primary ways searchers participate in the MEV game are by bidding exorbitant gas prices in on-chain PGAs to have their transactions strategically placed at specific positions within blocks by miners, and by expressing transaction ordering preferences to miners off-chain using novel MEV extraction tools like Flashbots.

The Searchers’ Typical MEV Extraction Process

Searchers start their MEV journey by monitoring the Ethereum blockchain using bots and automation tools for potential profit extraction opportunities.

When they spot an opportunity, searchers analyze the logic behind the trade, conceptualize the attack vector, and create a bundle—one or more transactions grouped and executed in the order they’re provided—designed to materialize its MEV extraction goal when mined. Searchers’ transaction bundles can refer to other users’ pending transactions in the mempool and target specific blocks for inclusion.

Once a bundle is created, a searcher will usually send it to a miner using off-chain networks like Flashbots’ MEV-Geth. This allows them to avoid the public transaction pool and express their transaction ordering preferences fast and risk-free (they save on gas fees when their transactions are rejected) directly to miners.

As searchers in aggregate submit a huge amount of bundles and block space is limited, miners auction their block space through a Flashbots Auction—an off-chain first-price sealed-bid auction where searchers can privately communicate their bid and granular transaction order preference directly to miners without paying for failed bids—and only include the most profitable transactions in their block. 

When a miner includes a searcher’s bundle or a transaction in their block, the MEV extraction process is complete. The searcher’s transaction gets confirmed on-chain and, if the MEV strategy was well-designed, the searcher would have extracted some amount of value from other traders on Ethereum.  

The Most Common Attacks


Front-running involves getting a transaction first in line in the execution queue ahead of a known pending transaction. In Ethereum, searchers run specialized front-running bots that scan the network for large orders on decentralized exchanges and submit competing transactions with higher gas fees to get them mined before the victim’s transaction. 

Sandwich Attacks

A sandwich attack is a variation of front-running whereby a predatory trader places two transactions, one before and another right after a pending victim transaction. Searchers typically use sandwich attacks to extract MEV from unsuspecting traders on decentralized exchanges by manipulating the price of an asset. For example, a trader can identify a token a victim is about to buy and make a trade to push the price up, then sell the token straight after the victim’s buy order has further increased the price. 


Back-running is the practice of getting a transaction ordered second in line or immediately after a known pending target transaction. Searchers typically employ back-running bots to monitor the mempool for new token pair listings or liquidity pools created on decentralized exchanges like Uniswap. When a bot finds a new token pair listing, it can place a transaction order immediately after the initial liquidity and buys as many tokens as possible, leaving only a small amount for other traders to buy later. The bot can then wait for the price to go up after other traders have purchased the tokens and sell at a higher price for a profit. 


Liquidators are searchers that specialize in extracting MEV through liquidations of over-collateralized loans on decentralized on-chain protocols like Compound, Maker, Aave, and dYdX. Liquidators run specialized bots to monitor the network for transactions presenting liquidation opportunities and act to either front-run or back-run transactions to be the first to liquidate a loan. Liquidators extract MEV from unsuspecting borrowers by liquidating their loans before they can repay the debt, then profit by selling the borrowers’ collateral.

Time-Bandit Attacks

Time-bandit attacks are a novel type of attack only miners can execute that retroactively reorganize blocks to capture MEV opportunities in previously mined blocks. When MEV is high enough compared to block rewards, it can be rational for miners to destabilize the consensus to capture MEV in older blocks. 

How Bad Is MEV?

According to Flashbots’ data, which only measures the lower bound of total extracted MEV and tracks only eight DeFi protocols, more than $689 million has been extracted from unsuspecting users of the Ethereum network since Jan. 1, 2021.

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In addition to scaling and attacks, MEV is one of the biggest issues Ethereum and similar smart contract blockchains face today. Pmcgoohan argued that MEV auctions would kill the Ethereum network. While Pmcgoohan takes a pessimistic view, the negative implications of MEV extraction are many and varied. The biggest one is that MEV represents an invisible tax that miners and searchers collect from users. Every dollar extracted through MEV is a dollar lost for users. Some would go as far as to describe it as theft. 

MEV also leads to network congestion and puts upward pressure on gas prices. The game theory involved generates a self-reinforcing loop of circular dependencies: arbitrage and liquidation opportunities create MEV opportunities, MEV-extracting bots compete for the opportunities via gas price bidding wars, and fee estimators use these bot-inflated gas prices as a reference, leading to users overpaying for transactions.

MEV also destabilizes Ethereum on a protocol level because it puts transaction finality and immutability to question. If MEV is bigger than the block rewards, miners are incentivized to destabilize consensus. If miners can reorder transactions in previous blocks for profit, the entire premise of blockchains as secure, predictable, and permissionless ledgers falls apart.

In light of the recent debate in the U.S. Senate on whether miners and validators should be defined as brokers, if these instances become commonplace, it will become increasingly more difficult to defend the role of miners as mere “passive and neutral transaction processors” on blockchain networks.

MEV erodes the usability, neutrality, transparency, decentralization, security of Ethereum today. It creates an environment where miners who are better at extracting MEV grow at the expense of honest ones, effectively skewing the core incentive structure at the heart of Ethereum’s security in the wrong direction.

Ethereum recently launched EIP-1559 and plans to move to Proof-of-Stake, but neither update will solve MEV. In fact, some MEV researchers worry that the upgrades may exacerbate the problem. 

While EIP-1559 is primarily designed to improve the predictability of transaction fees, the upgrade also features a fee burn function that negatively affects miners’ profitability, which, in turn, may lead miners to ramp up MEV extraction to compensate for the reward reduction. In response to EIP-1559, Ethermine—a mining pool accounting for roughly 20% of Ethereum’s hash power— has already introduced an MEV extraction program to redistribute the profits extracted through MEV between all miners in the pool.

Concerning the move to Proof-of-Stake, MEV extraction will work nearly the same way on Ethereum 2.0 as it currently does on Ethereum, except it will be done by validators instead of miners. Flashbots MEV researchers Alex Obadia and Taarush Vemulapalli believe that the introduction of MEV in validator rewards could be a “centralizing force,” and worry that “MEV could amplify oligopolistic dynamics in Ethereum 2.0 by enriching the entities with the most 32 ETH stakes faster than the ones with less (rich-get-richer dynamics).”

Is MEV Inevitable?

Some have concluded that MEV is inevitable. There are two schools of thought when it comes to this topic. The first school maintains that MEV is unavoidable, so the crypto community should try to alleviate the symptoms and subdue the negative externalities. The other school believes that the MEV problem is solvable, and hence the community should focus our efforts on trying to prevent it.

Flashbots, the leading research and development organization in the field, belongs to the first camp. It focuses on building tools such as MEV-Geth that “democratize access to MEV revenue and bring transparency to MEV.” In that regard, MEV-Geth is effectively a product offering Front-running as a Service (FaaS) to miners and MEV extractors. 

Proponents of the first school argue that, given the inevitability of MEV, FaaS is net beneficial because it eliminates negative externalities such as high transaction fees and network congestion while making up for the lost revenue from Ethereum’s EIP-1559 fee burning update. Thus, it indirectly funds Ethereum’s security as miners compete for MEV with higher hash power. 

On the other hand, some believe that FaaS is theft. Cornell University researchers have long advocated for an alternative solution, while computer science professor Edward Felten has claimed that MEV auctions increase centralization and exacerbate the problem for Ethereum users. Pmcgoohan also identifies with the second camp, arguing that MEV can be avoided. Critiquing Flashbots’ approach, Pmcgoohan suggests that MEV could be solved if the community builds “a consensus view of the mempool ordering transactions by time where it is discoverable.”

In the second camp, researchers are already gaining ground in minimizing or removing MEV by designing protocols that order transactions fairly. Current application-level solutions include ChainLink’s Fair Sequencing Service, Offchain Labs’ Aribtrum, and Automata Network’s Conveyor. While all of these protocols approach the MEV problem in varying ways, they depend on DeFi applications implementing them on a case-by-case basis. An ultimate, protocol-level panacea is yet to be found, let alone implemented.

This news was brought to you by ANKR, our preferred DeFi Partner.

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Eden to Protect Sushi Traders from MEV on Ethereum

Key Takeaways

  • Transaction ordering protocol Eden Network has launched to protect Ethereum users from MEV.
  • MEV is the amount of value miners can extract from transactions by reordering blocks, usually through frontrunning.
  • Eden has integrated Sushi, giving traders on the DEX an option to protect themselves from MEV.

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Eden, formerly ArcherDao, has rolled out its MEV-mitigation network for Sushi.

Eden Network Goes Live

Transaction ordering protocol Eden has launched its network to protect Ethereum traders from maximal extractable value (MEV) attacks.

To start off, the project has integrated its solution on Sushi, one of the most used decentralized exchanges on Ethereum mainnet DEXs. Sushi contains over $2.5 billion in total value locked.

Speaking of the launch and Ethereum’s upcoming EIP-1559 update, Eden Network core developer Caleb Sheridan said:

“EIP-1559 is the most important upgrade in the history of Ethereum. While it solves some of its major problems, like high gas fees and priority gas auctions, it creates others by slashing block producer revenue, which inadvertently incentivizes MEV. Eden Network is designed to complement the design of EIP-1559 while addressing the MEV problem head on by introducing a new transaction network that helps block producers make up lost revenue in exchange for protecting traders from MEV.”

MEV refers to the amount of value a miner can extract as profits by reorganizing blocks and frontrunning transactions. Other than Ethereum’s high gas fees, which can make the network unusable during periods of peak congestion, MEV is one of the smart contract blockchain’s biggest issues. 

Flashbots estimates that over $800 million has been lost to MEV since the beginning of 2020. Eden Network hopes to address this issue.

Eden functions by allowing transactions to bypass Ethereum’s public mempool. Instead, it uses a private transaction relay infrastructure called Taichi, where transactions are relayed to SparkPool directly.  

Eden is a fork of ArcherDao—its predecessor network that was integrated on Sushi as an MEV mitigation network in mid-July.

With the latest integration, Sushi traders will be able to access MEV protection as an optional feature through the exchange’s interface.

SIMETRI Research
Blockone Settlement

Sushi users can pay and lease priority slots on Eden Network to assure their transactions can be added to the next Ethereum block. 

Priority slots on the network can be tokenized and slot tenants can be determined with an auction mechanism using its native token, EDEN.  The token can be used to incentivize miners to protect them from various kinds of MEVs executed through bots.

Preventing MEV means Sushi traders can save significant amounts of funds on larger trade sizes, especially on pairs with low liquidity. 

In addition to Sushi, Eden Network has also partnered with Alpha Finance Labs and Band Protocol.

This news was brought to you by ANKR, our preferred DeFi Partner.

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