Market Overview

(Anton Bukov, 1Inch.Exchange and Dune Analytics)

Both SparkPool and F2Pool have acknowledged the launch of Chi minting programs, which the latter pool pinned on “latency of block validation times” leading to an “opportunity cost tradeoff for empty block mining.” (You can read F2Pool’s blog post published April 21 here). 

Chi mints overtime (Dune Analytics)

Gas token minting highlights a major tradeoff of using a mining pool for building blocks on behalf of miners. It is unclear if either SparkPool or F2Pool plan on sharing profits from Chi mintings, even though miners supply the hashpower enabling the blocks’ creation and are forgoing fees to mine empty blocks. If miners had a hand in block selection itself – as proposed under Stratum v2 – there would be less asymmetry in profit sharing.

EVM MEV?
 

Gas tokens are marketed as a method to store gas on the Ethereum network, and function similarly to an on-chain options contract.

Ethereum rewards people for deleting contracts in order to practice good data housekeeping. Chi and other gas tokens (GST1 and GST2) take advantage of this feature by creating contracts when gas fees are low and deleting contracts when gas fees are high. As expected, gas token prices increase when on-chain congestion ramps upwards.

Ethereum miners are the prime candidates to exploit this reward function, as the creators of the first gas token, Project Chicago , note. Miners get to choose what goes into a block, how they go into them and how much users must pay for using that block space. And, since mining pools direct hashpower, pools have an almost singular ability to exploit this flaw in the Ethereum Virtual Machine (EVM).

In that sense, mass Chi mints can be thought of as another form of Maximal or Miner Extractable Value (MEV) – where pools profit off of old design flaws in the EVM.

Finding Chi mints on-chain

Blocks mined with a gas price of 0 are a good indicator of miners conducting a transaction on behalf of themselves. While recent innovations in relay networks such as Bloxroute, TaiChi, and Flashbots make similar transactions possible for non-miners, wallet analysis and heuristics around non-miner Chi mints make it seem unlikely that a meaningful amount of the 0 gas price mints were from relay network traders.

Take this transaction , for example. Notice the 0 gas fee and the internal transaction which makes a call to 1INCH to mint gas tokens. Trader mints typically fill up half a block (140 Chi), but SparkPool and F2Pool fill the whole block with upwards of 380 Chi. That number will likely increase as Ethereum miners increased the per block gas limit last week from 12.5 million to 15 million.

Proof of Work Overview