Qin, Kaihua;
Zhou, Liyi;
Gervais, Arthur;
(2022)
Quantifying Blockchain Extractable Value: How dark is the forest?
In:
2022 IEEE Symposium on Security and Privacy (SP).
(pp. pp. 198-214).
IEEE: San Francisco, CA, USA.
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Abstract
Permissionless blockchains such as Bitcoin have excelled at financial services. Yet, opportunistic traders extract monetary value from the mesh of decentralized finance (DeFi) smart contracts through so-called blockchain extractable value (BEV). The recent emergence of centralized BEV relayer portrays BEV as a positive additional revenue source. Because BEV was quantitatively shown to deteriorate the blockchain’s consensus security, BEV relayers endanger the ledger security by incentivizing rational miners to fork the chain. For example, a rational miner with a 10% hashrate will fork Ethereum if a BEV opportunity exceeds 4× the block reward. However, related work is currently missing quantitative insights on past BEV extraction to assess the practical risks of BEV objectively. In this work, we allow to quantify the BEV danger by deriving the USD extracted from sandwich attacks, liquidations, and decentralized exchange arbitrage. We estimate that over 32 months, BEV yielded 540.54M USD in profit, divided among 11,289 addresses when capturing 49,691 cryptocurrencies and 60,830 on-chain markets. The highest BEV instance we find amounts to 4.1M USD, 616.6× the Ethereum block reward. Moreover, while the practitioner’s community has discussed the existence of generalized trading bots, we are, to our knowledge, the first to provide a concrete algorithm. Our algorithm can replace unconfirmed transactions without the need to understand the victim transactions’ underlying logic, which we estimate to have yielded a profit of 57,037.32 ETH (35.37M USD) over 32 months of past blockchain data. Finally, we formalize and analyze emerging BEV relay systems, where miners accept BEV transactions from a centralized relay server instead of the peer-to-peer (P2P) network. We find that such relay systems aggravate the consensus layer attacks and therefore further endanger blockchain security.
| Type: | Proceedings paper |
|---|---|
| Title: | Quantifying Blockchain Extractable Value: How dark is the forest? |
| Event: | 2022 IEEE Symposium on Security and Privacy (SP) |
| Dates: | 22 May 2022 - 26 May 2022 |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1109/sp46214.2022.9833734 |
| Publisher version: | https://doi.org/10.1109/SP46214.2022.9833734 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Privacy, Smart contracts, Forestry, Real-time systems, Blockchains, Peer-to-peer computing, Security |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10182325 |
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