Research Pulse Issue #49 01/24/22

  1. Empirical Analysis of EIP-1559: Transaction Fees, Waiting Time, and Consensus Security
    Authors: Yulin Liu, Yuxuan Lu, Kartik Nayak, Fan Zhang, Luyao Zhang, and Yinhong Zhao

Transaction fee mechanism (TFM) is an essential component of a blockchain protocol. However, a systematic evaluation of the real-world impact of TFMs is still absent. Using rich data from the Ethereum blockchain, mempool, and exchanges, we study the effect of EIP-1559, one of the first deployed TFMs that depart from the traditional first-price auction paradigm. We conduct a rigorous and comprehensive empirical study to examine its causal effect on blockchain transaction fee dynamics, transaction waiting time, and security. Our results show that EIP-1559 improves the user experience by making fee estimation easier, mitigating intra-block difference of gas price paid, and reducing users’ waiting times. However, EIP-1559 has only a small effect on gas fee levels and consensus security. In addition, we found that when Ether’s price is more volatile, the waiting time is significantly higher. We also verify that a larger block size increases the presence of siblings. These findings suggest new directions for improving TFM.

Link: https://arxiv.org/pdf/2201.05574.pdf

  1. Tutela: An Open-Source Tool for Assessing User-Privacy on Ethereum and Tornado Cash
    Authors: Mike Wu, Will McTighe, Kaili Wang, Istvan A. Seres, Nick Bax, Manuel Puebla, and Mariano Mendez

A common misconception among blockchain users is that pseudonymity guarantees privacy. The reality is almost the opposite. Every transaction one makes is recorded on a public ledger and reveals information about one’s identity. Mixers, such as Tornado Cash, were developed to preserve privacy through “mixing” transactions with those of others in an anonymity pool, making it harder to link deposits and withdrawals from the pool. Unfortunately, it is still possible to reveal information about those in the anonymity pool if users are not careful. We introduce Tutela, an application built on expert heuristics to report the true anonymity of an Ethereum address. In particular, Tutela has three functionalities: first, it clusters together Ethereum addresses based on interaction history such that for an Ethereum address, we can identify other addresses likely owned by the same entity; second, it shows Ethereum users their potentially compromised transactions; third, Tutela computes the true size of the anonymity pool of each Tornado Cash mixer by excluding potentially compromised transactions. A public implementation of Tutela can be found at https://github. com/TutelaLabs/tutela-app. To use Tutela, visit https://www.tutela.xyz.

Link:https://arxiv.org/pdf/2201.06811.pdf

  1. SoK: Blockchain Governance
    Authors: Aggelos Kiayias and Philip Lazos

Blockchain systems come with a promise of decentralization that, more often than not, stumbles on a roadblock when key decisions about modifying the software codebase need to be made. In a setting where “code-is-law,” modifying the code can be a controversial process, frustrating to system stakeholders, and, most crucially, highly disruptive for the underlying systems. This is attested by the fact that both of the two major cryptocurrencies, Bitcoin and Ethereum, have undergone “hard forks” that resulted in the creation of alternative systems which divided engineering teams, computational resources, and duplicated digital assets creating confusion for the wider community and opportunities for fraudulent activities. The above events, and numerous other similar ones, underscore the importance of Blockchain governance, namely the set of processes that blockchain platforms utilize in order to perform decision-making and converge to a widely accepted direction for the system to evolve. While a rich topic of study in other areas, including social choice theory and electronic voting for public office elections, governance of blockchain platforms is lacking a well established set of methods and practices that are adopted industry wide. Instead, different systems adopt approaches of a variable level of sophistication and degree of integration within the platform and its functionality. This makes the topic of blockchain governance a particularly fertile domain for a thorough systematization that we undertake in this work.
Our methodology starts by distilling a comprehensive array of properties for sound governance systems drawn from academic sources as well as grey literature of election systems and blockchain white papers. These are divided into seven categories, confidentiality, verifiability, accountability, sustainability, Pareto efficiency, suffrage and liveness that capture the whole spectrum of desiderata of governance systems. We interpret these properties in the context of blockchain platforms and proceed to classify ten blockchain systems whose governance processes are sufficiently well documented in system white papers, or it can be inferred by publicly available information and software. While all the identified properties are satisfied, even partially, by at least one system, we observe that there exists no system that satisfies most properties. Our work lays out a common foundation for assessing governance processes in blockchain systems and while it highlights shortcomings and deficiencies in currently deployed systems, it can also be a catalyst for improving these processes to the highest possible standard with appropriate tradeoffs, something direly needed for blockchain platforms to operate effectively in the long term.

Link: https://arxiv.org/pdf/2201.07188.pdf

  1. NFTs: Applications and Challenges
    Authors: Wajiha Rehman, Hijab e Zainab, Jaweria Imran, and Narmeen Zakaria Bawany

Before the widespread application of blockchain-based technologies, the mechanisms in place for verifying ownership of digital assets and thus, means of securing them remained susceptible to tampering that translated into significant losses. Decades of research and advancements in blockchain led to the development of Non-Fungible Tokens (NFTs), which are tokens that represent digital assets and have proof of ownership embedded. The novel characteristic of each token being unique and distinctive from another has strengthened the security of assets and reinforced unique ownership. This cutting-edge technology continues to grow and capture the attention of the masses as more applications of NFTs are identified with time. This research aims to present a comprehensive overview of NFT and its underlying core technologies, namely blockchain and Ethereum. Further, numerous platforms for buying and selling NFTs are presented along with the applications of NFTs across various sectors including education, fashion, sports, and digital art. Moreover, the paper highlights the key challenges in adaptation of NFT technology from the perspective of security, privacy, environmental impact, ownership, governance, and property rights.

Link: NFTs: Applications and Challenges | IEEE Conference Publication | IEEE Xplore

  1. Kirin: An Interactive Visualization for Decentralized Finance Applications in Ethereum Blockchain
    Authors: Ehsan Jahangirzadeh Soure, Saiyue Lyu, Xiaoyu Wen, and Ziqi Zhou

Ethereum is a popular blockchain-based software platform that supports transacting values and interacting between users and decentralized finance (Defi) applications securely. Tons of anonymous transactions and smart contract interactions happen in Ethereum, thus creating a large amount of data each day. Our goal is to find out how users interact with DeFi applications in a period. However, limited research focused on using visualizations to understand this issue. In this paper, We propose Kirin, a tool that first retrieves and preprocesses data from Ethereum and then visualizes the data interactively in two different views: the User Account View and the Project Metric view. The User Account View shows the user’s detailed information, including his asset distribution on Defi protocols. The Project Metric View presents different metric values of various DeFi applications in a period. We showcased how novice users can utilize Kirin to make investment decisions. We also evaluated Kirin using a user study to verify that our tool is approachable and helpful.

Link: https://ehsanjso.me/assets/Kirin.pdf

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Research Pulse #49 is out!

In Empirical Analysis of EIP-1559: Transaction Fees, Waiting Time, and Consensus Security, the authors provide a post-mortem of the implementation of EIP-1559, a transaction fee mechanism adopted by Ethereum last year. We have covered EIP1559 on the forum and evaluated its merits by summarizing and discussing Tim Roughgarden’s analysis of the proposal. This publication is interesting as it compares the game theory presented in that work with on-chain analysis.

In Tutela: An Open-Source Tool for Assessing User-Privacy on Ethereum and Tornado Cash, the authors present an interesting tool that evaluates the privacy of an Ethereum account. The paper features a tool that enables users to apply common clustering methodologies to their addresses and see for themselves how private their activities are.

Finally, in SoK: Blockchain Governance, the authors perform a literature review on the topic of protocol governance. This is an interesting analysis because it is focused on layer 1 governance mechanisms. This differs from previous attempts at governance SoKs which have historically focused on application-level governance, implemented as smart contract DAOs.

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Is there a way to have access to a pdf version of 4. NFTs: Applications and Challenges? I am unable to access it through my institution.

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