Notes 7/29: MEV Funding, Lightning Problems, and Tether Market Cap

Sometimes, actually most of the time, it is difficult to distinguish between actual news and trolls in crypto. And so we have Flashbots, a startup that claims to remove the “negative impacts” of Ethereum’s controversial Maximal Extractable Value (MEV) practice, announcing a raise of $60 million at a billion dollar valuation. According to the startup, investors and partners were invited in a reverse pitch “beauty contest for decentralization.”

MEV Shenanigans

The irony is rich here since Flashbots itself is as centralized as they come and not really beautiful to ordinary users of Ethereum. The organization works on MEVs, a practice that enables validators to pocket inflated user transaction fees by front running user transactions on Ethereum.

MEVs distort validator incentives by moving them away from providing security to profit-making. They also make ether prices volatile, as was demonstrated in Ether’s price pump earlier this year. Flashbots-run MEV relays, that connect validators among themselves, were also the first ones to fall in line with the Department of Treasury’s sanctions against crypto mixer Tornado Cash. So much so for censorship resistance.

The startup has said that the funds raised will be used to develop Suave – a platform that users can use to transact “cheaper and more privately” on Ethereum. That might be progress and an evolution from its shenanigans in the past. While MEVs currently operate only on the primary blockchain, Ethereum cofounder Vitalik Buterin has talked about expanding their use to Layer 2 platforms used to scale the blockchain’s transaction processing capability.

Square Lightning Payments

Payments using bitcoin’s lightning network might be coming this December to Square’s Cash App. Wait, isn’t lightning already revolutionizing payments at that other bitcoin payments app, Strike? Not so.

Lightning has myriad problems still to solve and it is facing accusations of becoming overly complex. Some developers have also described it as an “inelegant pile of ugly and complicated hacks.” The problems at the Lightning Network (LN) are many and range from custodial wallets in which users have restricted access to their bitcoin to complicated fee structures and low demand. But don’t tell that to CEO Mallers at Strike. He will tell you that the “free market” will figure it out.

Tether Market Capitalization

Tether’s market capitalization has almost touched $84 billion, a new record. This is the case even though trading volumes and liquidity is down in a crypto ecosystem suffering from the double whammy of summer doldrums and regulatory bottlenecks. The stablecoin also remains as opaque as ever in its operations.

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