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27 July 2021

How Ethereum Miners Could Exploit the Network and How to Fix It - Decrypt

How Ethereum Miners Could Exploit the Network and How to Fix It - Decrypt


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Miners are the oft-unacknowledged heroes of the Ethereum blockchain.

It refers to how much Ethereum miners can make—not simply from processing users' transactions and adding blocks to the chain, but by choosing what goes into each block and in what order.

But DeFi—the booming sector built on Ethereum that allows people to get loans, earn interest, or swap assets without intermediaries—often clogs up the Ethereum blockchain, making people wait for transactions to become final.

One thing this could lead to, wrote Noyes, is a breakdown of consensus by making it too enticing for miners to try to mess with blocks that have already been created as they look for arbitrage opportunities—though he noted in February that this was not yet happening.

Reorgs, or reorganizations, occur when there are competing chains on the blockchain due to blocks being mined at around the same time.

And as Noyes' colleague, Georgios Konstantopoulos, and Ethereum creator Vitalik Buterin wrote this week in apaper that looks at a hypothetical attack on DeFi protocolsvia reorgs, even two- to five-block reorgs aren't all that rare or malicious.

But reorganizations have several negative effects on the network, Konstantopoulos and Buterin said: they add costs to those running nodes (the hardware running the blockchain), they result in the user having to wait longer for transactions to be confirmed, and they make attacks on the network more likely.

They believe, however, that Ethereum's planned move away from a proof-of-work system, in which miners create new blocks, toproof of stake, in which validators deposit their ETH for the right to make new blocks, solves for this. 

The solution, they said, is for Ethereum to push forward with the merge and work as quickly, but safely, on it as possible. 

Asked whether it will solve MEV, Hasu said, "Only in the very limited sense that short-term reorgs become harder, but we are not seeing these in Ethereum today anyway."

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