The Merge combines the current Proof-of-Work (“PoW”) Ethereum Mainnet with the Beacon Chain Proof-of-Stake (“PoS”) system.

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The Merge has the large implications for the Ethereum ecosystem, such as:

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• The end of PoW mining for Ethereum
• Reduced energy consumption (~99.95%)
• Increased network security and decentralization
• Sets the stage for future scaling upgrades (e.g., sharding)

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The Merge also has implications for Etheruem stakers, including:

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• 90% reduction in ETH issued (aka. "triple-halving")
• At an average gas price of at least 16 gwei at least 1,600 ETH burned every day, effectively bringing net ETH inflation to zero or less post-Merge
• Stakers cannot sell staking rewards right now (only after withdrawals are enabled in the future)
• The addition of Maximum Extractable Value, or “MEV”:  The process by which block builders review the available transactions to be included in the next block and select the ones to include and in which order.
  

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Of all these implications, Maximum Extractable Value is set to be one of the most important for stakers.

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In this blog, we’ll cover the implications of MEV for stakers and Blockdaemon’s total readiness for The Merge mainnet.

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What is MEV?

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With MEV, block builders include, exclude, and change the order of transactions. These blocks are built and relayed to the validators.

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This process seeks to maximize the value that can be extracted per block produced.

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MEV will be an important additional revenue stream for stakers post-Merge.

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If the block your validator is publishing contains any MEV transaction bundles, the tips (extra rewards) will be sent to your Ethereum withdrawal address

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These MEV rewards are about 10-15% of all validators rewards and are expected to increase the total rewards from ~7% to ~8%

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For a full write-up of MEV, feel free to check out our previous blog post.

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How is Blockdaemon Handling MEV?

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As an industry-leading Ethereum validator, Blockdaemon is committed to an open source, democratized, solution to MEV.

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One such MEV solution is Flashbots’ MEV-Boost.

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Blockdaemon has successfully produced MEV-Boost blocks on the Goerli testnet. This follows Blockdaemon’s participation on the previous testnet Ropsten.

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To support this commitment, Blockdaemon is a founding member of the Flashbots Ethereum Working Group. Our MEV engineers actively work with Flashbots and others, to mitigate negative MEV externalities.  

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To date, Blockdaemon engineers have made important contributions to the success of Flashbots’ MEV efforts. These contributions have included:

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• Helping to identify and resolve software bugs
• Contributing to important MEV community education initiatives
• Adding tests to ensure the middleware is stable
• Internally building new features to manage MEV-Boost deployment & operations and large scale monitoring block production
• Successfully producing blocks using Bloxroute & Flashbots relays to further democratize MEV opportunities

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Our engineers have tested MEV-Boost across the Prysm Ethereum client, which is ready for The Merge.

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All infrastructure providers might not share the MEV rewards with their staking customers. Blockdaemon is dedicated to democratizing MEV and shares the MEV rewards with our staking customers.

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Blockdaemon has successfully tested and implemented MEV-Boost. We are fully prepared for The Merge.

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When is The Merge?

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The Merge will be triggered when the TTD reaches 58,750,000,000,000,000,000,000. TTD achievement is likely around early morning UTC on Sept 15th.

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You can track the estimated date by following this website, https://bordel.wtf/.

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The official release will transition the canonical Ethereum chain from Proof-of-Work to Proof-of-Stake.

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Blockdaemon will manage all updates on behalf of customers.

Note: Blockdaemon, like others across the industry, is continuing to proceed with excitement for the upcoming ETH Merge and intends to support MEV participation for our ETH Validator customers; customers who do not want their validator participating in MEV activities have the option to opt-out. Blockdaemon will continue to hold itself to the highest standard of AML/CTF processes and procedures and monitor ETH censorship as it evolves. Blockdaemon will adhere to all guidance that OFAC and other regulatory agencies formally release.

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