I didn’t know or understand a key benefit of Launchnodes core product until this week. I think it’s important to share this because I often refer to Ethereum as a general-purpose technology and in doing so make it sound less new and difficult to comprehend by using the analogy of the internet & railroads. This analogy and simplification does not always work or hold up.
This week I learnt that our customers will not only benefit from high fees as consensus layer validators take the profit once they take over the process of transaction validation and finalization from Ethereum miners completely. They’ll also inherit the ability to extract additional value from users by ordering and reordering transactions on blocks.
MEV is the amount of money a miner on Ethereum, and eventually, a validator on Ethereum can stand to make as a direct result of their ability to insert, leave out and reorder transactions within a block. On the artist formerly known as ETH 2.0, how this MEV is managed is still unclear, but what it is, is an additional revenue earner for our customers and Validator nodes more generally.
Flashbots estimated Ethereum miners made over $140 million from MEV income in May 2021 in their research. Of this MEV income, 46% is extracted from traders on Uniswap, which is one of Ethereum’s largest DEXs by total value locked. Alex Obadia, the researcher for Flashbots, estimates that ETH 2.0 validators stand to earn 1.93 ETH per year, or 70.9% more than what they are currently earning from network rewards alone, with the addition of MEV income.
We can’t know if these numbers are accurate yet, the truth is we don’t know yet exactly how it will work. Brains far bigger than mine at MEV roast are figuring that out. I had assumed this MEV would have been eliminated on or around the day of the merge, just after the unicorns and magic pixies finish installing the post-merge double rainbows. I was wrong. One of the many challenges is that the more nodes you have the more likely you are to get MEV rewards.
One rather informed chap on Twitter pointed out that staking providers are keeping quiet about MEV, perhaps with some of them taking a view to keep their clients MEV, in part because it’s unclear which nodes will receive the boon. It is not technically possible for Launchnodes to keep our clients MEV because we are the only truly non-custodial option for staking ETH. Our clients like us are likely to have 99 problems, but we won’t let MEV be one of them.
ETH staking is too big for just one organization we want a rich eco-system of competitors providing different services and value propositions ergo we ask all of them today and right now to unequivocally state that they will give their clients the opportunity to earn MEV and be transparent as to what that opportunity is and how it works and to promise to not keep it themselves. I repeat please confirm how your clients will get their MEV and confirm you will not keep it and that in the context of staking you agree that greed lessens what is gathered.
You know who you are and I know moral high horses are best climbed off as quickly as possible:)
Also, a quick shout out to our Nasdaq listed client BTCS, who stake at scale and are paying their shareholders the world’s first dividend in bitcoin. The Bividend. Super cool.