TLDR:

• Wash trading is a type of market manipulation in which an individual simultaneously buys and sells the same asset in order to create the appearance of higher trading volume and liquidity. This can be done for a variety of reasons, such as to inflate the price of a cryptoasset.

• Many have hypothesized that the growth of obscure NFT markets in 2021 and 2022 was due, in part, to entities involved with those projects engaging in wash trading.

• This paper tests this hypothesis using both on-chain and off-chain data. Astoundingly, they find that 5.66% of all NFT collections have been impacted by wash trading, with a total artificial volume of $3,406,110,774.

2. “Garrison: A Novel Watchtower Scheme for Bitcoin” by Arash Mirzaei, Amin Sakzad, Jiangshan Yu, and Ron Steinfeld

TLDR:

• The Lightning Network has the potential to solve one of Bitcoin’s biggest challenges: the scalability and practicality of payments. However, there are still security issues that have prevented its adoption, such as the requirement for participants to be online to secure their channels.

• In order to solve this impractical requirement, the concept of so-called “Watchtowers” was invented. “Watchtowers” are monitoring systems that circumvent the impractical requirement for participants to be online by socializing the monitoring of payment channels.

• This paper introduces a new schema for the creation of Watchtowers called Garrison. Unlike many previous constructs, Garrison does not require changes to Bitcoin’s code and offers several efficiency benefits.

3. “Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions” by Philippe Bergault, Louis Bertucci, David Bouba, and Olivier Guéant

TLDR:

• One of the biggest research areas in the industry in 2022 was the dynamics of liquidity provision to decentralized exchanges, such as Uniswap, given that not much is known about the users engaging in market making.

• Much of the research in this area analyzes a phenomenon called Impermanent Loss (IL), which can drastically impact the returns of Liquidity Providers (LPs). Previous papers have found that LPs often underperform simple buy-and-hold strategies.

• This paper corroborates this hypothesis and shows that, even when accounting for transaction fees, LPs perform poorly relative to the efficient frontier and very often face negative PnL.

4. “An Auditable Confidentiality Protocol for Blockchain Transactions” by Aoxuan Li, Gabriele D’Angelo, Jacky Tang, Frank Fang, and Baron Gong

TLDR:

• Privacy is important for the long-term viability of cryptoassets since it allows for greater economic freedom and autonomy, as individuals are able to make financial decisions without fear of surveillance or interference.

• At the same time, privacy is hard to achieve in public blockchains because all transactions are recorded on a public ledger and associated with a unique cryptographic address that can potentially be traced back to a real-world identity.

• This paper introduces an interesting privacy-protection mechanism for blockchains that uses Zokrates, an SDK for zkSNARKs on Ethereum, as well as Solidity to build a privacy-oriented zkRollup.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• DeFi is a vibrant and nascent area that has experienced tremendous growth over the past few years. Nevertheless, it can be challenging to measure this growth due to the lack of well-established metrics to compare and contrast DeFi protocols.

• This paper evaluates the most popular metrics currently used by analysts, such as Total Value Locked (TVL), Protocol Revenue, and Token Inflation, amongst others.

• The authors look specifically at the correlations between these metrics and protocol valuation to see if either can be predictive of returns.

2. “QLAMMP: A Q-Learning Agent for Optimizing Fees on Automated Market Making Protocols” by Dev Churiwala and Bhaskar Krishnamachari

TLDR:

• One of the biggest issues preventing the proliferation of decentralized exchanges is the lack of liquidity in some key markets. This contributes to asset prices within these DEXs being suboptimal relative to their centralized exchange counterparts.

• This is a particularly challenging issue because the entities currently providing liquidity to those markets consistently do so at a loss. This is predominantly due to a phenomenon referred to as Impermanent Loss (IL).

• Many believe that in order to counter IL, the fee model employed by DEXs needs to be revamped. This paper, however, provides an interesting alternative. Rather than changing a DEX’s fee model, the authors propose a machine learning model that liquidity providers can use to optimize their fee revenue across markets.

3. “Demystifying Bitcoin Address Behavior via Graph Neural Networks” by Zhengjie Huang, Yunyang Huang, Peng Qian, Jianhai Chen, and Qinming He

TLDR:

• Blockchains are pseudonymous in nature. Observers can see the addresses involved in all transactions, and these addresses function as pseudonyms.

• At times, it is crucial to understand who is the entity behind an on-chain address, especially in the event of systemic failures, such as the collapse of FTX. Frequently, this is done via so-called address classifiers.

• This paper introduces a new tool called BAClassifier, which can automatically classify (or cluster) Bitcoin addresses based on their behaviors. According to the authors, the BAClassifier outperforms existing Bitcoin address classifiers, with a precision-score and F1-score of 96% and 95%, respectively.

4. “Securing the Ethereum from Smart Ponzi Schemes: Identification Using Static Features” by Zibin Zheng, Weili Chen, Zhijie Zhong, Zhiguang Chen, and Yutong Lu

TLDR:

• On-chain Ponzi schemes can be incredibly detrimental to the performance of a crypto network. For example, in 2018, an infamous project called FOMO 3D gamified Ponzi schemes and at times used upwards of 80% of Ethereum block space.

• As such, tools that automatically identify Ponzis are critical to helping the ecosystem become more mature so that bad actors are pruned out, and block space is not wasted on toxic use cases.

• This paper introduces an interesting set of on-chain heuristics that can automatically identify the patterns of a Ponzi scheme and flag users that are engaging in this activity.

5. “SATP: A simple and scalable protocol for virtual state channel networks” by Andrew Stewart, Colin Kennedy, Mike Kerzhner, George Knee, Matthias Geihs, and Sebastian Stammler

TLDR:

• Payment Channel Networks (PCNs), such as Bitcoin’s Lightning Network, have popularized the idea of using off-chain coordination mechanisms for use cases such as payments.

• However, there are multiple applications beyond payments that make use of the very same construct. For example, there have been experiments on Ethereum’s Raiden Network that showcased how this technology can be used for smart contracts as well.

• This paper discusses yet another evolution of PCN designs, the advent of virtual channels, which can considerably improve efficiency and reduce the cost of utilizing these layer two networks.

6. “Safety Verification of Declarative Smart Contracts” by Haoxian Chen, Lan Lu, Brendan Massey, Yuepeng Wang, and Boon Thau Loo

TLDR:

• Developing secure smart contracts can be a daunting task, especially given the intricacies of popular smart contract languages such as Solidity. Beyond development, proving that a smart contract is entirely secure may at times seem impossible.

• In light of this challenge, there have been multiple approaches proposed to improve smart contract security, often through new programming languages. These programming languages use techniques such as formal verification to increase the security assurances of smart contracts.

• This paper discusses an emerging, logic-based programming language called DeCon which has been specifically developed with security in mind. This language features a safety verification tool called DCV which can be used to provide security proofs for DeCon contracts.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• In Proof-of-Stake networks, there needs to be a process where a single validator is selected to produce a block at a point in time. Often referred to as leader selection, this has been one of the biggest research areas in the field of distributed consensus given how critical this process is to the security of a cryptonetwork.

• As it is currently implemented, Ethereum uses a simplistic process for leader selection: an algorithm called RanDAO, which selects validators using a pseudorandom function. The biggest drawback of this system is that it requires validators to be known ahead of time. While this system resolves some coordination problems, it also enables a host of new attack vectors, as block producers can collude because they are known ahead of time.

• This paper presents a potential solution to this problem. It proposes using a Verifiable Delay Function (VDF) in the selection process. This function makes it very challenging for validators to know when they will need to produce a block at a point in time, thereby eliminating the collusion issues present in RanDAO.

2. “Throughput Limitation of the Off-chain Payment Networks” by Shayan Hamidi Dehshali, Seyed Mahdi Hosseini, Soheil Zibakhsh Shabgahi, and Behnam Bahrak

TLDR:

• Payment Channel Networks (PCNs) such as the Lightning Network are believed to offer limitless scalability, as transfers operate much like a cash system.

• As we have covered in SCRF in the past, there are structural constraints that may entail an upper bound on Lightning’s transactional throughput.

• This paper provides a model to reason about Lightning’s real throughput in light of limitations related to channel liquidity and path dependence. Using this model, they hypothesize that Lightning’s true throughput is close to 10,000 TPS.

3. “Decentralised Finance and Automated Market Making: Predictable Loss and Optimal Liquidity Provision” by Álvaro Cartea, Fayçal Drissi, and Marcello Monga

TLDR:

• Decentralized Exchanges enable the exchange of cryptoassets to be priced on the basis of a simple constant function. For this reason, they are often referred to as Constant Function Market Makers (CFMMs).

• CFMM are supported by Liquidity Providers (LPs) who allocate their funds into pools of cryptoassets representing each asset in a trading pair. These LPs receive transaction fees for every trade that uses the pool(s) to which they are actively providing liquidity.

• This paper introduces a model to better reason about LP returns using historical data from Uniswap v3. They find that LPs in Uniswap v3 have historically traded at a significant loss, which may entail a reevaluation of how these protocols are implemented.

4. “Powers-of-Tau to the People: Decentralizing Setup Ceremonies” by Valeria Nikolaenko, Sam Ragsdale, Joseph Bonneau, and Dan Boneh

TLDR:

• The intersection of Zero Knowledge Proofs (ZKPs) and smart contracts is one the most exciting research fields in the industry given the potential to improve the efficiency, scalability, and privacy assurances of smart contracts.

• Recently, many papers have come out proposing the retrofitting of Ethereum’s execution environment, the Ethereum Virtual Machine (EVM), into well-known zkSNARK schemes, such as Groth16.

• This paper takes a different approach, as it evaluates how such zkSNARKs can be used within WebAssembly (WASM), a new and more widely adopted execution environment.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Optimistic Rollup (ORU) systems like Optimism are currently amongst the most popular Ethereum scalability solutions. Dozens of thousands of transactions are processed within these systems on a daily basis.

• One of the challenges associated with ORUs is the way they are connected to Ethereum’s base layer: all of them must be implemented as a set of smart contracts that enforce validation rules and evaluate fraud proofs. This leads to expensive contracts that have large on-chain footprints, and that is not optimal.

• This paper proposes a new schema to natively verify and enforce fraud proofs within the Ethereum Virtual Machine (EVM), which could address many of the issues with Optimistic Rollups.

2. “DAO-Analyzer: Exploring Activity and Participation in Blockchain Organizations” by Javier Arroyo, David Davó, Elena Martínez-Vicente, Youssef Faqir-Rhazoui, and Samer Hassan

TLDR:

• There has been a noticeable effort in the industry to increase standardization when implementing Decentralized Autonomous Organizations (DAO).

• This has been made possible through frameworks such as the Aragon DAO suite and DAOhaus, which are effectively libraries of standardized DAO smart contracts.

• This paper introduces a new tool called DAO-Analyzer, which leverages this increase in standardization to produce statistics, metrics, and insights on DAOs implemented through popular frameworks.

3. “A Taxonomy of Decentralized Autonomous Organizations” by Christian Ziegler and Isabell M. Welpe

TLDR:

• Taxonomies can be helpful in organizing and evaluating the moving components and themes of a fast-growing industry.

• This paper proposes a fascinating taxonomy for DAOs that can be used to evaluate their growth, understand how they are structured, and potentially used in the context of a DAO vetting framework.

4. “Understanding the Adoption and Impact of GasTokens on Ethereum” by Lixuan Luo

TLDR:

• So-called gas tokens were invented in order to empower users to hedge against fast increases in transaction fees, which are priced on a per gas (unit of computation) basis.

• Put simply, these tokens function as vouchers that enable users to receive a discount in a future transaction. This is achieved by “locking in” block space on-chain during calm times when gas prices are low.

• This paper provides an excellent overview of how gas tokens have evolved and showcases fascinating data on their usage over time.

5. “Concentrated Liquidity Analysis in Uniswap V3” by Saleh Hashemseresht and Mohsen Pourpouneh

TLDR:

• The Uniswap V3 protocol is a considerable deviation from previous versions as it intends to improve the economics for Liquidity Providers (LPs).

• Previous analysis of Uniswap V1 and V2 protocols have shown that LP returns are dramatically impacted by impermanent loss, which is a loss incurred from providing liquidity instead of simply holding the asset in a wallet.

• This paper provides a mathematical formulation of Uniswap V3 and compares its dynamics with its predecessors, especially as it relates to impermanent loss.

6. “Quantifying Loss in Automated Market Makers” by Jason Milionis, Ciamac C Moallemi, Tim Avelin Roughgarden, and Anthony Lee Zhang

TLDR:

• Also on the topic of Automated Market Makers (AMMs), this paper looks at LP returns and providers a formal return function.

• The authors formalize the concept of "loss-versus-rebalancing’’ (ŁVR, pronounced "lever’'), which is a mathematical evaluation framework for liquidity providers.

7. “Two More Attacks on Proof-of-Stake GHOST/Ethereum” by Joachim Neu, Ertem Nusret Tas, and David Tse

TLDR:

• As a new system, Proof-of-Stake Ethereum still lacks rigorous security analysis, especially as it relates to LMD-Ghost, its new consensus engine.

• In response to previous attack vectors, the concept of ‘proposer boosting’ was introduced whereby block proposers can receive a boost from a cohort of nodes in order to prevent liveness failures.

• This paper introduces a new type of attack that circumvents ‘proposer boosting’ as it is currently implemented and, like the previous version, leads to liveness failures.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Ethereum’s transition to Proof-of-Stake was a massive engineering feat widely celebrated within the crypto community.

• Nevertheless, as with any nascent distributed system, there are novel attacks that have emerged with The Merge, especially related to liveness, which is a core property blockchains must retain.

• We have covered nascent PoS attack types on the forum, notably Rebalancing Attacks. This paper introduces a new type of attack called a Bouncing attack, which is a form of liveness attack that can impact Ethereum’s uptime if exploited on-chain.

2. “Optimistic and Validity Rollups: Analysis and Comparison between Optimism and StarkNet” by Luca Donno

TLDR:

• Rollups have become critical for the scalability of public blockchains, but their architecture and implementation vary widely.

• This paper does a great job of providing the conceptual building blocks of the two most popular rollup types: zero-knowledge rollups and optimistic rollups.

• Beyond just the theoretical backbone of these rollup types, the author also discusses the two most popular implementations of each rollup type: STARKNET and Optimism.

3. “Robust Clustering of Ethereum Transactions Using Time Leakage from Fixed Nodes” by Congcong Yu, Chen Yang, Zheng Che, and Liehuang Zhu

TLDR:

• Address clustering has become a popular practice amongst crypto data enthusiasts because it enables a real-world entity, such as a crypto exchange, to be associated with a set of addresses on-chain.

• In turn, this enables on-chain observers to have a better understanding of the activities that these entities are engaging in, which can be useful in due-dilligence and market sentiment analysis.

• This paper discusses a new way to cluster addresses associated with an entity via a network-level privacy attack at the node level.

4. “SoK: Not Quite Water Under the Bridge: Review of Cross-Chain Bridge Hacks” by Sung-Shine Lee, Alexandr Murashkin, Martin Derka, and Jan Gorzny

TLDR:

• Cross-chain bridges have faced severe security issues over the past year, and bridge hacks are amongst the largest in the history of cryptoassets.

• This paper provides interesting conceptual background on cross-chain bridges and describes how they are typically constructed.

• The paper also sheds light on notable bridge hacks, such as the PolyNetwork hack, and discusses the challenges associated with securing cross-chain bridges.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• A primary design goal for any blockchain system is to make it prohibitively expensive to reorganize the blocks that users consider to be “final”, or irreversible. Otherwise, blockchains would be considerably more susceptible to fraud via attacks such as double spends.

• In PoW systems, the susceptibility for a network to be captured has been measured in the context of “51% attacks” which are made possible by the centralization of mining resources.

• This paper discusses a variant of Bitcoin double spend attack called perishing mining. Like traditional double-spend attacks, this strategy involves mining a private chain to confuse network nodes unaware of the attack.

2. “Simplified State Storage Rent for EVM Blockchains” by Sergio Demian Lerner, Federico Jinich, Diego Masini, and Shreemoy Mishra

TLDR:

• Blockchain nodes are becoming increasingly expensive to run. The historical transactions, or state, of some blockchains exceed 20TB which prevents nodes to be run on commodity hardware, a problem often called state bloat.

• This issue has decreased the number of nodes validating blockchain transactions, which is problematic for many reasons, especially network security.

• This paper discusses a schema where the entities encoding information on the blockchain have to pay for state rent, which effectively socializes the impact that leveraging blockchains for storage has on network nodes.

3. “Accountable Safety for Rollups” by Ertem Nusret Tas, John Adler, Mustafa Al-Bassam, Ismail Khoffi, David Tse, and Nima Vaziri

TLDR:

• Optimistic Rollup designs have become the most popular scalability strategies not only for Ethereum but also for the smart contract ecosystem as a whole.

• At their core, optimistic designs trust a set of bonded operators that facilitate user transactions. If these intermediaries misbehave, users can provide fraud proofs and receive a reward. The system is optimistic in nature because it assumes intermediaries won’t misbehave since doing so will make them lose their stake.

• This paper discusses an important tool that can make these designs even safer: an accountability gadget for rollups. In this paradigm, network participants have stronger assurances around a node’s accountability which is intrinsically linked to the rollup’s security.

4. “An Efficient Verifiable State for zk-EVM and Beyond from the Anemoi Hash Function” by Jianwei Liu, Harshad Patil, Akhil Sai Peddireddy, Kevin Singh, Haifeng Sun, Huachuang Sun, and Weikeng Chen

TLDR:

• Zero Knowledge Proofs (ZKPs) have been used in privacy and scalability prototypes that have the potential to drastically improve the performance and usefulness of blockchains.

• Given the industry’s convergence on the Ethereum Virtual Machine (EVM), the intersection of the EVM and ZKPs has been a vibrant area of research.

• This paper discusses the verifiability of zero knowledge circuits within the EVM and proposes a new schema for a ZKP-compatible execution environment.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Over the course of 2022, we have witnessed an explosion of new Layer 1 protocols competing for market share in the smart contract ecosystem. The standardization of the Ethereum Virtual Machine (EVM) has contributed to this trend since it has decreased switching costs for application developers.

• As applications become increasingly cross-chain, the need for better interoperability solutions is now salient. The current approach using so-called bridges has many drawbacks, especially related to security as evidenced by the number of hacks that bridges have faced.

• This paper discusses an alternative cross-chain interoperability schema called SurferMonkey. Unlike public relayers, SurferMonkey uses Zero-Knowledge Proofs to intermediate cross-chain messages.

2. “Rational Ponzi Games in Algorithmic Stablecoin (Conceptual version)” by Shange Fu, Qin Wang, Jiangshan Yu, and Shiping Chen

TLDR:

• The collapse of TerraUSD highlighted the challenges of designing Algorithmic Stablecoins (AS) that continuously keep parity with a fiat currency.

• This paper discusses the dynamics of two popular types of Algorithmic Stablecoins (AS): Rebase and Seigniorage Shares, and formalizes their economics using Terra and Ampleforth as examples.

• Additionally, the paper showcases a very interesting framework to determine whether a stablecoin is a rational Ponzi scheme, i.e. its economics are based on Ponzi-like behaviors.

3. “Partially Anonymous Rollups” by Olivier Bégassat, Alexandre Belling, and Nicolas Liochon

TLDR:

• Rollups have become an immensely popular construct to scale blockchain applications today, as evidenced by the number of applications deploying Rollup versions.

• Generally speaking, blockchain rollups fall into two different categories: optimistic or zero-knowledge.

• This paper discusses an alternative construct called Partially Anonymous Rollups, which may offer interesting trade-offs related to privacy and transactional throughput.

4. “Diablo: A Benchmark Suite for Blockchains” by Vincent Gramoli, Rachid Guerraoui, Andrei Lebedev, Chris Natoli, and Gauthier Voron

TLDR:

• As mentioned previously, we are witnessing immense growth in the number of L1s available for application developers to pick from.

• Since there has also been some convergence on the Ethereum Virtual Machine (EVM), it can be challenging to fully assess their trade-offs.

• This paper showcases a schema called Diablo which can be used to benchmark the client of various competing L1 blockchains.

5. “Unjamming Lightning: A Systematic Approach” by Clara Shikhelman and Sergei Tikhomirov

TLDR:

• There are many issues that may impact the adoption of Bitcoin’s Lightning Network as a payment network.

• Amongst these exploits are so-called channel jamming attacks, which is a type of Denial of Service (DoS) attack.

• This paper introduces a solution to channel jamming via a system that combines unconditional fees, which are mandatory, as well as a peer reputation system.

6. “TAP: Transparent and Privacy-Preserving Data Services” by Daniël Reijsbergen, Aung Maw, Zheng Yang, Tien Tuan Anh Dinh, and Jianying Zhou

TLDR:

• There exists a naturally conflicting relationship between transparency and data privacy. Some applications require transparency for their core use case at the expense of user privacy. This is the case with many social media networks today.

• This paper discusses a data sharing schema called TAP: Transparent and Privacy-Preserving Data Services which aims to address this conflicting nature.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• PlonK has been extensively covered on SCRF as a potentially ground-breaking technology for blockchains given its ability to address, simultaneously, the issues of privacy and scalability that haunt blockchains today.

• This paper introduces a variant of PlonK called aPlonK, which authors claim offers the very same benefits of the original schema, but with smaller proof sizes and shorter verification times when batching is used.

• This schema and its accompanying library can be crucial building blocks for zk-rollups, a next-generation scalability technology for Ethereum.

2. “ZKBdf: A ZKBoo-based Quantum-Secure Verifiable Delay Function with Prover-secret” by Teik Guan Tan, Vishal Sharma, Zeng Peng Li, Pawel Szalachowski, and Jianying Zhou

TLDR:

• Verifiable Delay Functions (VDFs) are actively being evaluated in the field of distributed PoS consensus as a better building block for so-called leader selection, the process of determining who will mine a block at a point in time.

• Leader selection today is predominantly done via random oracles, which is a concerning trend due to the potential attack vectors that emerge when you know who will mine a block ahead of time.

• This paper introduces an interesting new construct that combines VDFs and Zero-Knowledge proofs to expand the usefulness of these functions, especially in processes that require privacy.

3. “POSE: Practical Off-chain Smart Contract Execution (Full Version)” by Tommaso Frassetto, Patrick Jauernig, David Koisser, David Kretzler, Benjamin Schlosser, Sebastian Faust, and Ahmad-Reza Sadeghi

TLDR:

• In the majority of smart contract platforms today, developers publish the code of their applications to the blockchain. The code is transparent and its storage is socialized across all entities running nodes.

• While this structure has been successful for a plethora of applications, there are drawbacks to be considered. Since the code is public, this structure might not be well-suited for applications that require strong privacy assurances. Furthermore, the socialization of storage costs might generate negative externalities as the size of blockchains grows.

• This paper discusses an alternative schema for smart contracts where the logic of an application is stored off-chain in a Trusted Execution Environment (TEE). While this does entail centralization considerations, it’s an interesting schema for use-cases that require privacy, such as those that deal with sensitive user information.

4. “Detecting Arbitrage on Ethereum Through Feature Fusion and Positive-unlabeled Learning” by Hai Jin, Chenchen Li, Jiang Xiao, Teng Zhang, Xiaohai Dai, and Bo Li

TLDR:

• Modern Decentralized Exchanges (DEXs) frequently rival their centralized counterparts on volume and breadth of market coverage.

• Nevertheless, there are fundamental differences between these two constructs, especially as it relates to how power users, such as high-frequency traders, drive market efficiency via arbitrage.

• This paper introduces a machine-learning model to identify the frequency of arbitrage trades in DEXs. The authors claim a 90% accuracy rate in identifying arbitrage trades on-chain.

5. “Anti-Collusion Multiparty Smart Contracts for Distributed Watchtowers in Payment Channel Networks” by Miao Du, Peng Yang, Wen Tian, and Zhu Han

TLDR:

• Payment Channel Networks (PCNs), Bitcoin’s Lightning and Ethereum’s Raiden networks, have shown promising properties for cryptoasset payments. However, there are still issues that prevent their mass adoption.

• Chief amongst these issues is the requirement for nodes to be online at all times to monitor for channel closures and malicious activity.

• This paper discusses one of the potential solutions to this issue: monitoring systems popularly called WatchTowers.

6. “Modeling Effective Lifespan of Payment Channels” by Soheil Zibakhsh Shabgahi, Seyed Mahdi Hosseini, Seyed Pooya Shariatpanahi, and Behnam Bahrak

TLDR:

• Also on the topic of Payment Channel Networks (PCNs), another issue faced relates to the management of the individual payment channels that make up a user’s total liquidity within the PCN.

• This paper provides interesting insights into how channels on the Lightning network are managed today and sheds light on their lifespan as users’ connections and routing structures change over time.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Mechanism design in the field of stablecoins continues to be a major topic amongst researchers, especially in the aftermath of UST’s collapse.

• The issues associated with the design of stablecoins have been formulated as a trilemma, whereby stablecoins can, at most, have two of the following three properties: Capital Efficiency, Decentralization, and Price Stability.

• This paper discusses a new stablecoin design called GHO, which attempts to provide optimal trade-offs via a combination of dynamic supply, over-collateralization and so-called facilitators.

2. “Reap the Harvest on Blockchain: A Survey of Yield Farming Protocols” by Jiahua Xu and Yebo Feng

TLDR:

• “Yield-Farming” has become one of the most prevalent strategies implemented by DeFi projects to attract users. Its core tenet is rather simple: the users of a protocol are rewarded with that protocol’s native token for providing liquidity and services.

• However, as a cryptoeconomic mechanism, little is known about the effectiveness of yield farming, or even the nature of the users engaged in this activity.

• This paper attempts to shed light on how Yield Farming is implemented across a plethora of protocols and the role of yield aggregators such as Yearn and BadgerDAO.

3. “Notebook: A Zero-Knowledge Identity Infrastructure Layer” by Nathaniel Masfen-Yan, Solal Afota, Dhruv Mangtani, and Sacha Arroues-Paykin

TLDR:

• Many crypto-native User Identity and Authentication systems have been proposed over the years, but the pseudonymous nature of blockchain addresses poses considerable privacy issues that have prevented such services from proliferating.

• Recently, products such as the Ethereum Name Service and Metamask’s User Authenticator have considerably improved the user experience of on-chain authenticators, but the privacy issue remains.

• This paper introduces an interesting new schema called Notebook which uses Zero-Knowledge Proofs (ZKPs) to implement user authentication in a semi-private and, importantly, highly-efficient manner.

4. “Optimal Incentive Mechanisms for Fair and Equitable Rewards in PoS Blockchains” by Hadi Sahin, Kemal Akkaya, and Sukumar Ganapati

TLDR:

• The design of Proof-of-Stake (PoS) reward mechanisms is an active research area in the industry and one that has attained substantial levels of interest after The Merge; Ethereum’s transition to PoS.

• In reality, PoS is an umbrella term used to classify protocols that implement Sybil protection through financial operations, such as the locking up, or staking, of funds.

• This paper provides interesting background on the different flavors of PoS and especially focuses on how the reward mechanisms employed by these protocols impact wealth distribution in their respective blockchains.

5. “When is Spring coming? A Security Analysis of Avalanche Consensus” by Ignacio Amores-Sesar, Christian Cachin, and Enrico Tedeschi

TLDR:

• The Avalanche consensus protocol continues to garnish interest by researchers and investors alike, as evidenced by AVAX’s high market capitalization.

• However, much remains to be formalized about the inner workings of Avalanche and its intrinsic properties as a consensus mechanism.

• This paper is the first attempt at providing an abstract specification of the Avalanche protocol and a matching formal analysis through pseudo-code.

• The author’s analysis reviews a relatively serious vulnerability that affects the liveness of the protocol and potential remediation techniques are discussed.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• DeFi’s goal is to redefine how financial institutions operate and disintermediate financial services and products as much as possible.

• This ambitious goal entails not only copying legacy financial products, such as futures, but also creating entirely new types of products, such as flash loans.

• Needless to say, there is a lot of complexity involved in this new paradigm. This paper provides a Systemization of Knowledge and does an excellent job explaining the key concepts involved.

2. “Measurement, Analysis, and Insight of NFTs Transaction Networks” by Prakhyat Khati

TLDR:

• NFT continue to contribute to the popularization of cryptoassets, but academic research on the nature of how they are used is still thin.

• This study sheds light on how NFT users interact via a topology analysis, effectively making NFT addresses “nodes” and graphing their relationship.

• This type of temporal graph analysis can be helpful in understanding NFT market cycles and the different types of user archetypes involved, from retail users to funds.

3. “Property-Based Automated Repair of DeFi Protocols” by Palina Tolmach, Yi Li, and Shang-Wei Lin

TLDR:

• Smart contracts are irreparable once encoded on the blockchain, making it difficult for developers to balance experimentation and safety.

• Given this dynamic, smart contract developers are constantly evaluating new tools that not only automate the detection of bugs but also patch them automatically.

• The latter is often called Automated Program Repair (APR) in the field of computer science, and it represents the use of various techniques to make software “heal” itself.

• This paper proposes an APR scheme for smart contracts called DeFinery, which is designed to automatically patch a smart contract as vulnerabilities are identified.

4. “Ring Signatures with User-Controlled Linkability” (paywalled) by Dario Fiore, Lydia Garms, Dimitris Kolonelos, Claudio Soriente, and Ida Tucker

TLDR:

• Ring Signatures are amongst the most popular techniques used to achieve transactional privacy in the field of cryptoassets. Monero, one of the most popular privacy-oriented cryptoassets, relies on Ring Signatures to hide the footprint of XMR senders on its blockchain.

• Nevertheless, as a means to privacy, much still needs to be researched about Ring Signatures to fully assess their trade-offs, especially as it relates to both their efficacy as a privacy solution as well as efficiency on-chain.

• This paper discusses a new type of Ring Signature called Ring Signatures with User-Controlled Linkability (RS-UCL), which gives users more flexibility when generating privacy-preserving transactions.

5. “Verifiable Timed Linkable Ring Signatures for Scalable Payments for Monero” by Sri Aravinda Krishnan Thyagarajan, Giulio Malavolta, Fritz Schmid, and Dominique Schröder

TLDR:

• Like the previous paper, this paper also discusses Ring Signatures as they are specifically implemented in Monero.

• Instead of privacy, the focus of this work is to increase the functionality of this signature type by enabling so-called “Timelocks” which open the possibility for Monero to feature better scalability solutions, as well as a level smart contract functionality.

5. “Verifiable Timed Linkable Ring Signatures for Scalable Payments for Monero” by Sri Aravinda Krishnan Thyagarajan, Giulio Malavolta, Fritz Schmid, and Dominique Schröder

TLDR:

• Like the previous paper, this paper also discusses Ring Signatures as they are specifically implemented in Monero.

• Instead of privacy, the focus of this work is to increase the functionality of this signature type by enabling so-called “Timelocks” which open the possibility for Monero to feature better scalability solutions, as well as a level smart contract functionality.

6. “A Privacy-Preserving Watchtower Scheme with Constant Storage Overhead” by Yan Huang, Ruian Li, Junxin Liu, Yankai Xie, Chi Zhang, and Lingbo Wei

TLDR:

• Payment Channel Networks (PCNs), such as the Lightning Network have the potential to solve one of Bitcoin’s biggest challenges: the scalability and practicality of payments.

• However, there are still security issues that have prevented the adoption of PCNs such as the requirement for participants to be online.

• The advent of so-called “Watchtowers” is promising, as they circumvent that impractical requirement by socializing the monitoring of payment channels.

• This paper introduces a new design for a Watchtower that uses Schnorr threshold signatures to minimize the risk of monitoring being compromised by adversaries.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• The majority of users interact with their blockchain of choice via simple wallets such as MetaMask. These programs tend to rely on centralized infrastructure to facilitate the interaction between decentralized applications and users that do not run their own nodes.

• While incredibly convenient, such wallets pose a centralization threat that enables not only specific users to be targeted but may also be a single point of failure to the network as a whole.

• This paper presents a fascinating scheme for more secure crypto wallets via so-called light-clients. Beyond diminishing the impact of centralization, the schema presented improves time-to-completion by 9×, communication by 180×, and energy usage by 30×.

2. “λ - Constant Function Markets Generalizing and Mixing Automated Market Makers” by Giorgos Felekis and Jesper Kristensen

TLDR:

• Mechanism design is one of the most fascinating research areas in DeFi, especially as it relates to lending and trading use cases.

• The most predominant design used by Decentralized Exchanges such as Uniswap is called the Constant Function Market Maker (CFMM) model, whereby swaps are priced based on the balance of two liquidity pools relative to a constant function.

• There have been many discussions on how this design can be improved so that swaps can be more efficiently priced. This has led to the creation of multiple variants of the CFMM model.

• This paper discusses a mix of these variants, namely the constant sum and constant mean CFMM model, as a way to achieve better pricing. The authors call this blend Lambda CFMM (λCFMM) and show how, beyond price efficiency, this design can decrease the impact of impermanent loss on liquidity providers.

3. “Code Cloning in Smart Contracts on the Ethereum Platform: An Extended Replication Study” by Faizan Khan, Istvan David, Daniel Varro, and Shane McIntosh

TLDR:

• Application cloning is a common practice in Ethereum since many dApps share the very same functionality. For example, most ERC20s, NFTs, and even DEXs are often implemented using the same, hopefully battle-tested, codebase.

• This paper evaluates the extent to which code cloning takes place in Ethereum. The authors find that 27% of smart contracts on Ethereum are exact clones of other contracts, which speaks to the level of standardization and (at times) plagiarism currently in place.

• Standardization is a positive trend for the industry, especially when it comes to ERC20s and NFTs, but the line between plagiarism and standardization can often be often blurred.

4. “Et tu, Blockchain? Outsmarting Smart Contracts via Social Engineering” by Nikolay Ivanov and Qiben Yan

TLDR:

• This succinct (2 pages), yet fascinating paper discusses very relevant and practical social engineering attack vectors on Ethereum Smart Contracts.

• For context, social engineering is the use of deception to manipulate entities (often those that control a smart contract) into sharing confidential information or otherwise facilitating a hack.

5. “MANDO-GURU: Vulnerability Detection for Smart Contract Source Code by Heterogeneous Graph Embeddings” by Hoang H. Nguyen, Nhat-Minh Nguyen, Hong-Phuc Doan, Zahra Ahmadi, Thanh-Nam Doan, and Lingxiao Jiang

TLDR:

• It is critical to identify vulnerabilities in a smart contract before the contract is deployed to the network. In order to do that, developers leverage testing suites that automate vulnerability detection.

• This paper introduces a new smart contract testing tool called MANDO-GURU which employs sophisticated machine learning techniques to improve vulnerability detection by upwards of 24%.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• LMD-GHOST is the current consensus protocol employed by Proof-of-Stake Ethereum. Although this protocol was designed to address a host of attacks, it is susceptible to so-called voting rebalancing attacks.

• These attacks can be highly disruptive to the Ethereum network as they break economic finality and lead to reorganizations on the blockchain that most applications are not equipped to handle.

• This paper proposes a new consensus protocol called Goldfish which is designed to address this attack vector. Crucially, Goldfish is highly compatible with the architecture of LMD-GHOST and does not entail big changes to Proof-of-Stake Ethereum.

2. “Exploring Vulnerabilities and Anomalies in NFT Marketplaces” by Xiangyu Ruan

TLDR:

• NFT markets might have cooled down after the recent market downturn, but there is still an enormous amount of interest in how NFTs can be better implemented and secured.

• This paper provides a formalization of the security issues faced by popular NFT implementations and taxonomizes the different types of exploits via historical case studies.

• Beyond NFT implementation frameworks, the paper also discusses market structures and historical anomalies in popular NFT marketplaces.

3. “Fighting Sybils in Airdrops” by Zheng Liu and Hongyang Zhu

TLDR:

• The air-dropping of tokens is a popular distribution mechanism and its primary goal is to reward the early users of an application.

• However, airdrops are frequently manipulated by sophisticated attackers who try to pose as multiple users in order to get a disproportionate number of “free” tokens.

• This paper analyzes historical airdrops and frames this type of manipulation as a Sybil attack. The authors then present clustering techniques that can be used by projects to flag malicious accounts.

4. “Towards Interoperability of Open and Permissionless Blockchains: A Cross-Chain Query Language” by Felix Härer

TLDR:

• Blockchain Interoperability is the ability of users and applications to interact with one another across different networks.

• A lot of the focus on this front has been on the development of cross-chain bridges which essentially recreate user balances in supported blockchains and relay their messages.

• While most interoperability discussions today tend to focus on bridge design, there are other challenges introduced by this cross-chain paradigm, especially as it relates to data normalization.

• This paper is interesting as it focuses on the data inconsistency problem and proposes a new query language that is agnostic of a blockchain’s data model. If adopted, this language can be used by cross-chain applications to normalize transactional data.

5. “Permissionless Clock Synchronization with Public Setup” by Juan Garay, Aggelos Kiayias, and Yu Shen

TLDR:

• Blockchains are designed to track changes in a ledger, or an application, over the course of time. While blocks serve as a measure of time, they can at times be at odds with “human” time. This, in turn, impacts use-cases where the human time reported in a block serves as an input for an application, such as a weather oracle.

• This paper discusses how clock synchronization can be better implemented on blockchains in a permissionless setting. The authors apply this schema to Bitcoin and, as a first use case, evaluate how this clock can be used to adjust mining difficulty more appropriately.

6. “A Study of Inline Assembly in Solidity Smart Contracts” by Stefanos Chaliasos, Arthur Gervais, and Benjamin Livshits

TLDR:

• Inline Assembly is a relatively sophisticated technique used by smart contract developers to embed low-level code in their applications.

• While some opcodes are only available through Inline Assembly, the primary motivation for its use is gas optimization as the on-chain footprint of applications can be decreased by these low-level primitives.

• This paper is the first comprehensive study of the use of Inline Assembly and sheds light on the predominance of this technique. It also provides valuable insights to developers on the appropriateness of Inline Assembly and ways that Solidity can be enhanced for this practice.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

About SCRF

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Privacy is at the forefront of industry discussions given the recent arrest of the developer of Tornado Cash.

• It can be argued that achieving privacy in the context of blockchains is the only way that many critical use cases for this technology, especially those that require personal data, can be accomplished.

• This paper presents a fascinating schema called Zapper, which is a proof-of-concept of a private smart contract system that hides the identity of its users, as well as the applications they interact with.

2. “Measuring Node Decentralisation in Blockchain Peer-to-Peer Networks” by Andrew Howell, Takfarinas Saber, and Malika Bendechache

TLDR:

• One of the biggest determinants of a network’s decentralization is the number of independent nodes, or participants, it retains over time.

• The very same principle is true for cryptoasset networks, which often comprise thousands of nodes hosted across many services and geographies.

• This paper evaluates how cryptoasset nodes can be monitored and sheds light on the IP distribution and hosting providers of different cryptoassets.

3. “Authentication, Authorization, and Selective Disclosure for IoT data sharing using Verifiable Credentials and Zero-Knowledge Proofs” by Nikos Fotiou, Iakovos Pittaras, Spiros Chadoulos, Vasilios A. Siris, George C. Polyzos, Nikolaos Ipiotis, and Stratos Keranidis

TLDR:

• The intersection of blockchains and IoT continues to garnish substantial interest by academia and industry participants.

• Given the highly sensitive nature of IoT data, many critics have shown concern for this trend due to the low privacy guarantees that blockchains currently offer.

• This paper explores the use of Zero Knowledge Proofs (ZKPs) to obfuscate aggregated IoT data and limit the potential for privacy attacks.

• While it does not apply this schema to blockchains, the paper does shed light on the primitives that would be required in order for IoT applications to operate on blockchains in a private setting.

4. “A Comparison of the Limit Order Book and Automated Market Maker” by Caren de Vries

TLDR:

• The trading of assets is one of the key use-cases in DeFi, with platforms like Uniswap frequently settling billions of dollars worth of trades.

• DeFi exchanges are often implemented using the Automated Market Maker (AMM) model which is substantially different than traditional orderbook exchanges.

• This paper provides a comprehensive comparison of these two market types and covers all of their mathematical underpinnings.

5. “WTEYE: On-Chain Wash Trade Detection and Quantification for ERC20 Cryptocurrencies” by Wei Cui and Cunnian Gao

TLDR:

• Also on the topic of trading, one of the biggest concerns with permission-less AMMs is the susceptibility to nefarious market attacks, such as wash trading.

• For context, wash trading is a form of market manipulation where an entity can affect the price of an asset by simultaneously buying and selling it.

• In traditional markets, exchange operators monitor the identity of buyers and sellers to prevent that from happening. However, that is not possible (or perhaps wanted) in the context of AMMs.

• This paper does a great job proposing a detection model for wash trading in AMMs and quantifies how much it has taken place.

• Astonishingly, their experiment finds that, for most ERC20s, the rate of wash trade is at least 15% of the token’s volume.

6. “ReSuMo: Regression Mutation Testing for Solidity Smart Contracts” by Morena Barboni, Francesco Casoni, Andrea Morichetta, and Andrea Polini

TLDR:

• Mutation testing is a relatively new field in computer science and is used to evaluate the quality of a software testing suite or to develop new ways to test software.

• The basic idea of mutation testing is the introduction of small changes, or mutations, to a software program with the ultimate goal of identifying unwanted or unexpected behavior.

• This paper introduces a tool called ReSuMo, which applies regression mutation testing to Solidity Smart Contracts.

About SCRF The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Properly securing DeFi applications can be an extremely challenging task as new types of vulnerabilities are virtually discovered on a weekly basis.

• As an emerging area, it is crucial to document DeFi security incidents so that smart contract developers can learn from them and not repeat the same mistakes.

• Given the frequency of DeFi exploits, documentation is often siloed and not sufficiently rich in details, a trend evidenced by the lack of post-mortems.

• This paper provides a comprehensive analysis of DeFi security incidents and compiles a substantial amount of information on them. In order to contextualize these exploits, the authors present a framework that systematizes different types of vulnerabilities into four layers: DeFi Protocol Layer (Pro), Smart Contract Layer (SC), Blockchain Consensus Layer (CON), and Network Layer (NET).

2. “Auto-Tune: Efficient Autonomous Routing for Payment Channel Networks” by Hsiang-Jen Hong, Sang-Yoon Chang, and Xiaobo Zhou

TLDR:

• Bitcoin’s Lightning Network continues to gain traction as the industry’s largest Payment Channel Network. Nevertheless, there are still challenges when it comes to increasing the efficiency and assurances of Lightning payments.

• Over the years, new algorithms have been proposed to address these challenges via improved payment routing, which relates to the path and size permutations that a Lightning payment undergoes before it reaches its final destination.

• This paper introduces a new routing algorithm called Auto-Tune, which features an interesting set of improvements over the status-quo solution, the Flash algorithm, especially as it relates to routing fees.

3. “Pied-Piper: Revealing the Backdoor Threats in Ethereum ERC Token Contracts” by Fuchen Ma, Meng Ren, Lerong Ouyang, Yuanliang Chen, Juan Zhu, Ting Chen, Yingli Zheng, Xiao Dai, Yu Jiang, and Jiaguang Sun

TLDR:

• At times smart contracts must be able to perform critical actions, such as the minting of tokens, blacklisting of users, or updating a DeFi application to a new version.

• These actions are implemented as functions in the smart contract, and many have expiration dates given that such functionality can pose non-trivial security risks.

• This paper evaluates critical functions, specifically in ERC contracts, and provides insights into when these functions are exploited.

4. “Gromit: Benchmarking the Performance and Scalability of Blockchain Systems” by Bulat Nasrulin, @devos50, Georgy Ishmaev, and Johan Pouwelse

TLDR:

• Over the past two years, the industry has witnessed a Cambrian explosion of smart contract platforms competing with Ethereum.

• A core tenet spoused by these competitors revolves around scalability: the ability to process dozens of thousands of transactions per second.

• However, there are several additional factors that must be considered beyond scalability in order to properly assess the virtues and drawbacks of these systems.

• This paper provides an interesting evaluation framework that enables layer 1s to be properly benchmarked.

**About SCRF **The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

TLDR:

• Maximal Extractable Value (MEV) has been shown to cause negative externalities to regular users, such as increased slippage rates in DEXs as well as increased transactional costs.

• This paper evaluates MEV in a Proof-of-Stake context where developed lending markets for the staked asset exist. It provides interesting context and formalized mathematical models describing the competitive nature of lending and staking.

• The authors propose a fascinating schema to attempt to avoid bad competitive equilibria between staking and lending via a redistribution mechanism.

• This mechanism effectively enables MEV revenue to be shared with PoS validators and further incentivizes staking.

2. “zk-PCN: A Privacy-Preserving Payment Channel Network Using zk-SNARKs” by Wenxuan Yu, Minghui Xu, Dongxiao Yu, Xiuzhen Cheng, Qin Hu, and Zehui Xiong

TLDR:

• Payment Channel Networks (PCNs), like Bitcoin’s Lightning Network, provide a scalable way to transfer funds between users.

• However, there are concerns around their privacy guarantees and many proof-of-concept privacy attacks on Lightning have been published.

• This paper provides a new approach to the construction of PCNs, leveraging Zero Knowledge Proofs to theoretically increase the privacy and efficiency of layer 2 payments.

3. “To EVM or Not to EVM: Blockchain Compatibility and Network Effects” by Ruizhe Jia and Steven Yin

TLDR:

• Smart contracts have been popularized by Ethereum, in part due to the high functionality enabled by its execution engine, the Ethereum Virtual Machine (EVM).

• Competing layer 1s, such as Avalanche, have attempted to gain market share by enabling applications built on Ethereum to be executed on their platforms. This is predominantly done by copying the EVM and reusing all open-source software built for it.

• This paper provides a fascinating analysis of this trend and features insights on why the EVM became an industry standard as well as the strategic significance of building EVM-compatible applications.

4. “Exploring Price Accuracy on Uniswap V3 in Times of Distress” by Lioba Heimbach, Eric Schertenleib, and Roger Wattenhofer

TLDR:

• Decentralized exchanges (DEXs), such as Uniswap, may at times settle more trades than the largest centralized exchanges. In order to better compete with them, Uniswap recently released the third iteration of its protocol, Uniswap v3, which attempts to further improve price efficiency in its markets.

• This paper provides an empirical evaluation of efficiency in Uniswap v3 in times of price shocks and compares these markets to their centralized counterparts.

• The authors find critical pricing inefficiencies in Uniswap v3 and highlight some of the structural problems that impact the liquidity providers of these markets.

5. “Analysis of Non-Fungible Token Pricing Factors with Machine Learning” by Kin-Hon Ho, Yun Hou, Tse-Tin Chan, and Haoyuan Pan

TLDR:

• The pricing of Non-fungible Tokens (NFTs) is susceptible to multiple factors. Generally speaking, the rarity of an NFT can be a major determinant of its price.

• This paper evaluates the role that rarity plays in pricing NFTs, especially in the field of gaming, by looking at on-chain data from Axie Infinity.

• They find that, although rarity plays a major role in valuation, the utility provided by the NFT can also drastically impact its value.

**About SCRF **The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.