Interview With Aleph Zero On The MEV Problem That Could Cost Ethereum Users $1 Trillion In Losses

To date, Ethereum remains one of most dynamic and innovative crypto-blockchains. Ethereum, which has embraced thousands of users ever since its conception, is the king in DeFi. This industry’s hottest trends are represented by billions of dollars of total value (TVL).

Ethereum is, however, one of most expensive platforms. There has been a rise in competition to capitalize on this problem-driven MEV tactics and bad actors.

Many Ethereum projects have been working to address this issue. To understand this, we met Adam Gagol, Ph.D. who is the cofounder of Cardinal Cryptography (a Web3 venture studio) and Aleph Zero (a Swiss non-profit that seeks an enterprise-grade solution for the MEV problem). We heard what they had to say.

Q: What is Aleph Zero and what are the project’s objectives?

A:Aleph Zero is an efficient and fast blockchain with DAG-based consensus protocols.

We’re developing a privacy-centric framework with use cases that span multiple addressable markets, including the decentralized finance (DeFi) sector, healthcare, gaming, digitization, supply chain management, and more.

The Aleph Zero blockchain aims to solve privacy issues by offering the first hybrid privacy solution which will offer innovative security measures based on a unique combination of “zero-knowledge” proofs (ZKPs) and Secure Multiparty Computation (sMPC).

Q: Could tell our readers unfamiliar with the topics, what MEV stands for and why it’s one of the most important issues to address for Ethereum at the moment?

A:Maximal extractable value (MEV) is an acronym that stands for Maximal Extractable Value. It refers to the highest amount of block production beyond the gas and block rewards. Transactions can include, exclude, or change the order in blocks.

This type of attack occurs when a block producer is able to see the transactions submitted on-chain and insert their own transactions ahead of users — getting the best deals and leaving everyone else with less value.

Aleph Zero intends to address the Maximal Extractable Valu (MEV), problem through our Liminal MPC framework, submarine sends and other means. We’ve done so by ensuring an encrypted transaction is immediately ordered but only revealed after a specific period (as an example, after three blocks have been finalized).

This method is not able to affect the order for their benefit as they must provide an order to transactions. However, it leaves the transaction content unknown.

Q: What makes Aleph Zero so different from Flashbots and other projects that attempt to reduce the MEV impact on Ethereum?

A: We’re actually solving the MEV problem at its root.

Flashbots is one example of another solution. These upgrades do not address the root problem. This is because block creators are incentivized and have the power to place orders in the best interests of their block producers. Liminal’s main purpose is automate the sending of submarines.

The user cannot reveal encrypted transactions in a classic submarine send scenario because they were done manually. Aleph Zero addresses this problem by making sure that an encrypted transaction can be ordered immediately, and only after a specified period of time (e.g. after 3 blocks are completed).

Q: Many users were hoping that the change in Ethereum’s market fee with EIP-1559 was going to bring a solution to the high cost of using the network. What is the real cause of these high transaction costs? What is Aleph Zero doing in order to help improve this ecosystem?

A:The low transaction throughput on Ethereum blockchain is what causes high transaction costs. You can get around 15 transactions per second and more people want to use the Ethereum blockchain.

EIP-1559 was not aimed to solve the MEV problem, so no one should be surprised that it didn’t. The EIP-1559 London update only made matters worse. The EIP-1559 implementation in London upgraded made the problem worse. It created mechanisms that lower fees could be protected against volatility. But it was at the expense miners. MEV has become more attractive than ever as block production revenue was reduced by about a third.

It didn’t remove the power of miners to reorder transactions, and since they’re now earning less per block, they’ll need to make up that 30 percent revenue somewhere else. So long as the incentive and ability remain, manipulation will continue to keep MEV high at the expense of the network’s users.

DeFi will have greater privacy and economic benefits from Liminal.  The block producers won’t be able to arbitrarily order transactions in an unfair manner.

Q: What do you think it’s the biggest obstacle for crypto and blockchain technology to achieve mass adoption? MEV could be a barrier to users joining a blockchain.

A: It wouldn’t impact new users so much but MEV could halt adoption from bigger players who tend to trade higher quantities. But it’s only a part of the greater need for us as developers to remove all friction to make the blockchain as accessible to everybody as web 2 is.

For mass adoption, accessibility and affordability are the greatest challenges facing the industry. When you look at something like the iPhone or smart TVs, these devices are simple to use, whether you’re 8 or 80.

Enterprises still have the ability to use DeFi and NFTs. The average person doesn’t want to remember a long key phrase or lose a thumb drive that  can cost them a fortune in lost crypto. Accessing it should be just as simple (or even easier) as the web. It also needs to be affordable.

Last month’s big crypto news were the Constitution DAO (and the ENS airdrop). Both required transaction fees of $50 or more, and in the case of the Constitution DAO, you double that fee in pulling the money out when it failed to win the Sotheby’s auction. 100 dollars is quite a sum to spend just to give $100 to charity. DeFi was supposed to remove all these intermediaries from the financial system, but there’s no way you would pay a 100% fee upfront to your bank.

Q:Is Aleph Zero possible in the next decade, with more institutions and individuals taking interest in this new space?

A:Our platform will continue to grow. Aleph Zero will strive to offer cross-chain interoperability and an industry-leading privacy system. The world in ten years won’t be dominated by just one blockchain solution like Ethereum, but at the same time, none of these so-called “Ethereum killers” is likely to take it offline.

People used to believe that Bitcoin was the only viable option, or that there were only few blockchain options. What is the problem? There’s not a single web-building app, a single camera app or music player or email provider. In reality, we’re more likely progressing toward a world where there will be more smart contract networks than ever.

And that’s great — that’s why Aleph Zero is so focused on providing a secure solution with cross-chain compatibility. We’re helping developers future-proof their projects to remain nimble, regardless of what happens down the road.


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