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In the multifaceted landscape of Ethereum, the year 2023 unfolded with significant shifts, particularly in the domains of Maximal Extractable Value (MEV) and Account Abstraction. In this blog, we delve into the key statistics, market overviews, and future trajectories of MEV and Account Abstraction.
The Rise of MEV
MEV stands for “Maximal Extractable Value” and it is the potential profit miners or validators gain by moving transactions in blockchain blocks. It involves various tactics which enable miners to extract value by controlling transaction order or content.
Market Overview
- ETH extracted by validators
A staggering 282.5K ETH has been earned by validators or proposers in 2023 taking the total tally of ETH paid to 360.7K ETH post the merge. The distribution of ETH payments remained consistent over the year, with a major spike observed in May’ 23.
- Arbitrage Value
In 2023, MEV validators earned a whooping $75 million from arbitrage in revenue, which consisted of a ~ $68 million revenue from Uniswap followed by Curve and Balancer with $26 million and $22 million in revenue respectively. Generally, MEV is referred to in badlights, however, it is really important to minimize price discrepancies between markets. MEV Bots try to maintain stablecoins pegs and rebalance liquidity across pools, keeping asset prices aligned across exchanges.
- No. of Validators
Throughout the year, Ethereum experienced consistent growth in its validator count, reaching a total of ~ 959k validators. Notably, the influx of validators surged after March ’23, contributing significantly to this upward trend, with a noteworthy addition of ~ 516k validators up until November ’23 in the year.
Future Outlook
One of the major updates expected in 2024 is the release of “The Simple Universal MEV Auction” (SUAVE). It is designed to tackle prevalent issues within the current MEV framework, striving to establish a more decentralized, transparent, and fair MEV system within the blockchain ecosystem.
SUAVE’s concept revolves around a transparent auction mechanism, wherein users confidentially submit bids for their transactions, indicating the MEV they’re willing to offer for inclusion in a block. This setup prompts miners/validators to compete in forming blocks comprising the highest-paying transactions, thereby ensuring an equitable distribution of MEV among all involved participants.
The Emergence of Account Abstraction
Account abstraction empowers users in DApps by granting full fund control when engaging with smart contracts. It was introduced through EIP-4337 which offers a universal adoption without consensus modifications. Named ERC-4337, it employs the “EntryPoint” smart contract, acting as a user account proxy managing transactions and gas fees. The contract verifies gas reserves and, if insufficient, autonomously covers fees or seeks external contributions.
Key Statistics
- Monthly Active ERC-4337 smart contracts
The ERC 4337 smart contracts witnessed an extraordinary quarterly growth rate of 11,837% between the first and second quarters of 2023, signifying an exceptional surge of over 27,000% in user expansion within that interval. Furthermore, the cumulative quarterly growth rate for users throughout 2023 amounted to an impressive 1537%.
- Monthly Successful User Ops
User Operations, a concept involving “pseudo-transactions” executing actions on behalf of users, has seen remarkable dominance on the Polygon network, which is evident by the fact that it commands a ~ 65.7% market share with a ~43.9% user adoption rate.
Key Players
- Polygon
By November 2023, Polygon hosted ~ 850K accounts and logged ~ 5.2 million user operations. It witnessed a surge in July ‘23 with ~ 440K user operations, which stemmed from CyberConnect’s integration. Biconomy facilitated deployment for nearly ~ 30k accounts, while Pimlico played a pivotal role in July and August, bolstering account abstraction adoption by supporting bundlers and paymasters, enhancing the ecosystem’s growth.
- Optimism
Optimism logged ~ 170K accounts and ~ 538K user operations driven by the Beam Wallet’s introduction. This innovative wallet allows fee coverage using transfer coins. ZeroDev and StackUp’s SDKs further enriched Optimism, enabling Web3 app development and custom transaction flows.
- Arbitrum
Arbitrum hosted ~ 233K accounts and ~ 338K user operations, the surge in July and August 2023 can be attributed to Zerodev, Biconomy, and user tests. StackUp initially managed bundlers and paymasters until Q2, 2023, but Alchemy took over from September, holding over 80% monthly share. This transition highlights Arbitrum’s evolving dynamics and reliance on key network players.
- Ethereum
Ethereum boasts ~ 743 accounts and ~ 5K user operations, nearly doubling in the latter half of the year. Zerodev contributes the bulk of accounts, while limited user operations come from Safe and Biconomy. Most transactions involve minting and transferring stETH, cbETH, and rETH. StackUp mainly manages bundlers and paymasters, pivotal for network transactions.
Future Outlook
The account abstraction market, still emerging, revolves around the adoption of EIP-4337. Its greatest potential extends beyond simple logins, offering significant advantages to decentralized applications (DApps) through complex, custom on-chain interactions.
2023 data shows increased adoption, particularly due to advancements by major Layer 2 solutions, which are crucial for scaling Ethereum. The future of account abstraction, heading into 2024, focuses on innovations like permissionless modular infrastructure, integration with fiat and DeFi services, DApp SDKs, and the development of independent account layers, expected to be key drivers in the market’s evolution.
Crypto Outlook 2024
2023 was a roller-coaster ride for the crypto sphere, marked by dynamic shifts, innovative advancements, and transformative trends that reshaped the industry’s landscape. Our Crypto Outlook Report for 2024 reflects on the highs, lows, and pivotal moments that defined the past year, while also peering into the horizon to forecast the exciting potential and emerging patterns set to influence the year ahead, with insights from industry leaders at Stepn, Enjin, Hacken, SuperScrypt, and more.
Click here to read the full report!
