Opinion: Loring Harkness, Brainbot Gmbh and Shutter commercial director
Earlier this year, the Ethereum Foundation launched a $1 trillion security initiative. This is the development of a broader campaign to coordinate the image of the chain for new audiences of non-cryptic retail investors, Wall Street and traditional financial institutions.
On paper, initiatives are nothing but good. Ethereum is refreshing, recognising its shortcomings. The proposed approach also provides a clear pathway to being “much better” when it comes to security. This is a direction that provides an industry that wants to attract peace of mind. However, the fundamental problem with Ethereum security issues is that it is too transparent.
A 1,000 dollar dream
The Ethereum Foundation’s Trillion Dollar Initiative considers a world where billions of individuals each have comfortable storage of on-chain over $1,000 each. If you take on a constant trajectory based on the current growth rate of Ethereum’s unique wallet holders, that milestone is within 10 years. When Ethereum celebrates its 10th anniversary on July 30th, we envision a huge mass adoption of the chain at the system and retail level.
As a rule, this progress is out of reach of Ethereum. Ethereum’s Defi protocol manages more than $64 billion in total value lock (TVL). With the growing involvement of foundations with Wall Street giants such as BlackRock, Fidelity, JPMorgan and Robinhood, traditional financial juggernauts have publicly embraced Ethereum-based financial products and examined the maturity of blockchain.
Despite Ethereum’s reputation-enhancing efforts, blockchain security researchers and innovators are increasingly urgent warnings about the extent of malicious maximum extraction values (MEVs), particularly in Ethereum.
Since 2020, over $1.8 billion has been extracted through Ethereum MEVs, at the expense of everyday users primarily through malicious MEVs. Some might say that this is all part of a defi game. In reality, that’s incredibly unfair, especially as non-Web3 natives become on-chain. The population that makes up billions of users is what Ethereum wants to persuade.
Ethereum trading orders
The architecture of Ethereum reveals fundamental vulnerabilities. Transactions processed on Ethereum must pass through public members whose transactions are broadcast to everyone, including bad actors and bots, before being confirmed. At this stage, the bot reorders transactions for attacks, frontruns, and profits.
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Originally intended to enhance validation, this transparent design creates an optimal environment for predatory actors to analyze pending transactions and manipulate transaction orders in an advantageous way.
Another reality is that sandwich attacks, frontrunning, and other malicious MEV exploits sit in the grey area of regulation. To address this, there are several developments in the work of the European Securities and Markets Agency (ESMA), but there is no formal framework to police this activity. Also, there are few consequences to explain to the attacker.
Sacrifices total transparency
This is not a new problem, there are solutions that claim to address malicious MEVs. However, it’s not a significant opportunity to begin with, and prioritizing providing users with a more equal slice of pie. Current private transaction pools create centralisation risks and often simply shift to different actors rather than eliminating MEV extractions.
MEV Boost attempts to democratize MEV extraction, but does not rule it out. While redistributes MEV benefits between builders and proposers, users still suffer from frontrunning and sandwich attacks.
The only reliable solution to Ethereum’s malicious MEV crisis is to redesign the way transactions flow through the network. The answer lies in Ethereum’s Mempool encryption, which utilizes a distributed system in which a distributed party network temporarily encrypts all transactions until the transaction is complete.
Encrypting transactions until they are permanently placed in blocks can achieve an equal arena where malicious MEVs are virtually impossible. Ethereum’s encrypted Mempool transforms the user experience by automatically providing protocol-level protection against malicious MEVs to all users without the need for users to take action.
Most people don’t switch between RPC or DEX, so the only real solution is to default fairness. It also eliminates the need for today’s patchwork of centralized MEV intake tools.
This encrypted Mempool system seems simple, but represents a massive architectural change in Ethereum.
A change to the underlying protocol for Ethereum is required. The required code changes touch on the most basic components of Ethereum: transaction propagation mechanisms, consensus protocols, and execution environments. The timeline for these changes affects multiple network upgrades and can take years to fully implement. As Ethereum continues to grow at its current speed, the demand for viable long-term solutions to such threats will only increase.
Ethereum’s next move
As institutional capital continues to be poured into the Ethereum ecosystem, the interests of addressing the vulnerability of its malicious MEVs continue to grow. The recent wave of institutional adoption offers a deceptive sense of security that hides the underlying technical crisis. Still, it’s only a matter of time before institutions and users ask questions about the vulnerability.
The $1 trillion security initiative deserves strong community support as it targets issues at the heart of Ethereum’s value proposition. Can you trust that the network handles transactions quite a bit?
The technology’s path to Ethereum’s fairness is clear: encrypted memory. What remains is whether the Ethereum community will resolve implementing these changes before institutional trust is eroded.
Price lists may seem promising today, but without dealing with the malicious MEV crisis, Ethereum’s long-term security and viability remains at risk.
Opinion: Loring Harkness, director of commercials for Brainbot Gmbh and Shutter.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
