Decentralization of Ethereum's Builder Market
- URL: http://arxiv.org/abs/2405.01329v2
- Date: Fri, 3 May 2024 02:38:41 GMT
- Title: Decentralization of Ethereum's Builder Market
- Authors: Sen Yang, Kartik Nayak, Fan Zhang,
- Abstract summary: We study one of the least decentralized parts of the most used blockchain system in practice.
To avoid centralization caused by Maximal Extractable Value (MEV), adopts a novel mechanism that produces blocks through a builder market.
Our findings help identify directions for improving the decentralization of builder markets.
- Score: 13.369643484986593
- License: http://creativecommons.org/licenses/by/4.0/
- Abstract: Blockchains protect an ecosystem worth more than $500bn with their strong security properties derived from the principle of decentralization. Is today's blockchain really decentralized? In this paper, we empirically studied one of the least decentralized parts of Ethereum -- the most used blockchain system in practice -- and shed light on the decentralization issue from a new perspective. To avoid centralization caused by Maximal Extractable Value (MEV), Ethereum adopts a novel mechanism that produces blocks through a builder market. After two years in operation, however, the builder market has evolved to a highly centralized one with three builders producing more than 90% of blocks. Why does the builder market centralize, given that it is permissionless and anyone can join? Moreover, what are the security implications of a centralized builder market to MEV-Boost auctions? Through a rigorous empirical study of the builder market's core mechanism, MEV-Boost auctions, we answered these two questions using a large-scale auction dataset we curated since 2022. Unlike previous works that focus on who wins the auctions, we focus on why they win, to shed light on the {openness, competitiveness, and efficiency} of MEV-Boost auctions. Our findings also help identify directions for improving the decentralization of builder markets.
Related papers
- Who Wins Ethereum Block Building Auctions and Why? [2.762397703396294]
The MEV-Boost block auction contributes approximately 90% of all blocks.
Between October 2023 and March 2024, only three builders produced 80% of them.
We identify features that play a significant role in builders' ability to win blocks and earn profits.
arXiv Detail & Related papers (2024-07-18T22:49:37Z) - MEV Ecosystem Evolution From Ethereum 1.0 [6.151915040556504]
In traditional finance, there are possibilities to create values, e.g., arbitrage offers to create value from market inefficiencies or front-running offers to extract value for the participants having privileged roles.
Such opportunities are readily available in DeFi ecosystems, where diverse participants engage in financial activities.
In this survey, first, we show how lucrative such opportunities can be. Then, we discuss how protocolfollowing participants trying to capture such opportunities threaten to sabotage blockchain's performance.
Finally, we review the current state of research trying to restore trustlessness and decentralization to provide all DeFi participants with a fair marketplace
arXiv Detail & Related papers (2024-06-19T14:22:26Z) - IT Strategic alignment in the decentralized finance (DeFi): CBDC and digital currencies [49.1574468325115]
Decentralized finance (DeFi) is a disruptive-based financial infrastructure.
This paper seeks to answer two main questions 1) What are the common IT elements in the DeFi?
And 2) How the elements to the IT strategic alignment in DeFi?
arXiv Detail & Related papers (2024-05-17T10:19:20Z) - Flashback: Enhancing Proposer-Builder Design with Future-Block Auctions in Proof-of-Stake Ethereum [27.386337024680245]
Auction mechanisms used between searchers, builders and proposers are crucial to the overall health of the blockchain.
In this paper, we consider PBS design in as a game between searchers, builders and proposers.
A key novelty in our design is the inclusion of future block proposers, as all proposers of an epoch are decided ahead of time in proof-of-stake (PoS)
Our analysis shows the existence of alternative auction mechanisms that result in a better equilibrium to players compared to state-of-the-art.
arXiv Detail & Related papers (2024-05-15T15:58:21Z) - Unveiling Decentralization: A Comprehensive Review of Technologies, Comparison, Challenges in Bitcoin, Ethereum, and Solana Blockchain [1.6070833439280312]
Bitcoin stands as a groundbreaking development in decentralized exchange throughout human history, enabling transactions without the need for intermediaries.
Solana introduces a novel architecture for high-performance blockchain, employing timestamps to validate decentralized transactions.
This paper aims to offer valuable insights and comparative analysis for both researchers and practitioners.
arXiv Detail & Related papers (2024-04-07T07:27:03Z) - Enhancing Trust and Privacy in Distributed Networks: A Comprehensive Survey on Blockchain-based Federated Learning [51.13534069758711]
Decentralized approaches like blockchain offer a compelling solution by implementing a consensus mechanism among multiple entities.
Federated Learning (FL) enables participants to collaboratively train models while safeguarding data privacy.
This paper investigates the synergy between blockchain's security features and FL's privacy-preserving model training capabilities.
arXiv Detail & Related papers (2024-03-28T07:08:26Z) - chainBoost: A Secure Performance Booster for Blockchain-based Resource Markets [0.6383640665055312]
We propose chainBoost, a secure performance booster for decentralized resource markets.
It expedites service related operations, reduces the blockchain size, and supports flexible service-payment exchange modalities at low overhead.
We implement a proof-of-concept prototype for a distributed file storage market as a use case.
arXiv Detail & Related papers (2024-02-25T14:19:41Z) - Onchain Sports Betting using UBET Automated Market Maker [45.410818354926406]
Decentralized sports betting requires automated market makers (AMMs) for efficient liquidity provision.
Existing AMMs like Uniswap lack alignment with fair odds, creating risks for liquidity providers.
The paper introduces UBET AMM (UAMM), utilizing smart contracts and algorithms to price sports odds fairly.
arXiv Detail & Related papers (2023-08-18T02:19:30Z) - Unpacking How Decentralized Autonomous Organizations (DAOs) Work in
Practice [54.47385318258732]
Decentralized Autonomous Organizations (DAOs) have emerged as a novel way to coordinate a group of entities towards a shared vision.
In just a few years, over 4,000 DAOs have been launched in various domains, such as investment, education, health, and research.
Despite such rapid growth and diversity, it is unclear how theses actually work in practice and to what extent they are effective in achieving their goals.
arXiv Detail & Related papers (2023-04-17T01:30:03Z) - Token Spammers, Rug Pulls, and SniperBots: An Analysis of the Ecosystem of Tokens in Ethereum and the Binance Smart Chain (BNB) [50.888293380932616]
We study the ecosystem of the tokens and liquidity pools, highlighting analogies and differences between the two blockchains.
We estimate the lifetime of the tokens, discovering that about 60% of them are active for less than one day.
We present an exit scam fraud and quantify its prevalence on both blockchains.
arXiv Detail & Related papers (2022-06-16T14:20:19Z) - Pump and Dumps in the Bitcoin Era: Real Time Detection of Cryptocurrency
Market Manipulations [63.732639864601914]
We perform an in-depth analysis of pump and dump schemes organized by communities over the Internet.
We observe how these communities are organized and how they carry out the fraud.
We introduce an approach to detect the fraud in real time that outperforms the current state of the art.
arXiv Detail & Related papers (2020-05-04T21:36:18Z)
This list is automatically generated from the titles and abstracts of the papers in this site.
This site does not guarantee the quality of this site (including all information) and is not responsible for any consequences.