Time Moves Faster When There is Nothing You Anticipate: The Role of Time in MEV Rewards

TL;DR

This paper investigates how validators in Ethereum's PoS system strategically delay block proposals to maximize MEV rewards, analyzing the risks and benefits of such waiting games through quantitative and simulation methods.

Contribution

It introduces a detailed analysis of waiting strategies in PoS Ethereum, highlighting their impact on MEV extraction, consensus stability, and validator incentives, which was previously underexplored.

Findings

Delayed proposals can increase MEV rewards beyond standard protocol payouts.

Orphaned blocks are not always proposed later than non-orphaned ones.

Consensus disruption occurs only with significant delay strategies.

Abstract

This study explores the intricacies of waiting games, a novel dynamic that emerged with Ethereum's transition to a Proof-of-Stake (PoS)-based block proposer selection protocol. Within this PoS framework, validators acquire a distinct monopoly position during their assigned slots, given that block proposal rights are set deterministically, contrasting with Proof-of-Work (PoW) protocols. Consequently, validators have the power to delay block proposals, stepping outside the honest validator specs, optimizing potential returns through MEV payments. Nonetheless, this strategic behaviour introduces the risk of orphaning if attestors fail to observe and vote on the block timely. Our quantitative analysis of this waiting phenomenon and its associated risks reveals an opportunity for enhanced MEV extraction, exceeding standard protocol rewards, and providing sufficient incentives for validators to play the game. Notably, our findings indicate that delayed proposals do not always result in orphaning and orphaned blocks are not consistently proposed later than non-orphaned ones. To further examine consensus stability under varying network conditions, we adopt an agent-based simulation model tailored for PoS-Ethereum, illustrating that consensus disruption will not be observed unless significant delay strategies are adopted. Ultimately, this research offers valuable insights into the advent of waiting games on Ethereum, providing a comprehensive understanding of trade-offs and potential profits for validators within the blockchain ecosystem.