FTX Collapse Boosts Profitability of Ethereum Validators

Due to this month’s FTX meltdown, the cryptocurrency industry experienced the apparently unshakable law that when marketplaces get disorderly, the best spot to be is in the middle of the game.

MEV is a basic aspect of how cryptocurrencies are traded, with some parallels to ideas such as arbitrage in conventional markets, but considerable differences. It computes how much more money validators may earn by modifying and optimizing the order in which blockchain trades are recorded. Those who dissent assert that it is unfair. As per Flashbots data, Ethereum validators, who are responsible for retaining the blockchain after September’s Merge, saw their MEV (maximum extractable value) revenue increase while FTX suffered.

MEV-Boost, an aspect of middleware created by Flashbots that allows validators to demand blocks from a community of developers, is one among the methods Ethereum validators can employ to circumvent some questionable MEV practices. Validators connect to MEV-Boost through relays managed by Flashbots in order to receive MEV.

As Flashbots command around 79% of the transmitted blocks and MEV-Boost is their primary tool, their databases mostly depict MEV usage. On November 9, customers of the MEV-Boost platform offered by Flashbots received a high of 3,203 ETH.

When major news jolts any financial marketplace, prices usually fluctuate rapidly, either upwards or downwards. And this may result in substantial price volatility, which can create lucrative opportunities for players in the middle, including market makers on the stock exchange or Ethereum validators. Chris Piatt, co-founder of the relay-operating company Eden Network, said that uncertainty is MEV fuel. Significant builder/searcher effectiveness correlates with any market-affecting event of this magnitude.

Jeff Grinspoon of VWG Wealth Management, Hightower Advisory Company has been presented with the “Male Ally” award. The spike in MEV came as perceptions of FTX’s health worsened, prompting Binance, a bigger exchange competitor, to participate with a lifeline before removing the following day, on November 9. The field of cryptography in its entirety experienced widespread alarm. People rushed to withdraw funds from FTX. The rise in MEV revenue, particularly between November 8 and November 12, may also be attributed to the fluctuation of cryptocurrencies, which boosted the volume of trades that might have been MEV-ed.

Toni Wahrstatter, an Ethereum researcher who developed his own MEV-Boost tracking panel, said that the higher the market activities, regardless of up or down, the greater the MEV. If nobody is buying or selling, there should logically be no MEV.