PEPE Meme Coin Frenzy Enriches Ethereum Validators Powering the Blockchain

The recent frenzy surrounding the meme coin PEPE resulted in a significant boost in profits for validators who operate the Ethereum network - the epicenter of the excitement - over the weekend.

Validators of Ethereum's proof-of-stake network saw a remarkable rise in profitability over the weekend as the meme coin PEPE caused a surge of interest in the network, leading to an increase in MEV-Boost payments. According to the mevboost.pics dashboard, the combined revenue from MEV-Boost payments and transaction fees nearly matched the earnings made by validators during the frenzy surrounding the downfall of Sam Bankman-Fried's FTX crypto exchange. These figures demonstrate the immense potential for profits in the world of cryptocurrency, as well as the importance of validators in maintaining the integrity of blockchain networks.

On May 6, the MEV revenue and gas fees combined yielded a total of 3,006.78 ETH, valued at $5.6 million in current market conditions. Out of this, 549.05 ETH was generated in MEV revenue and 2,457.73 ETH was generated in gas fees. Moving ahead to November 9, during the height of the FTX collapse, the total revenue generated was 3,929.68 ETH, equivalent to $6.1 million, with 2,505.69 ETH coming from MEV revenue and 1,423.99 ETH from gas fees. These figures highlight the significant revenue streams that can be generated through MEV and gas fees in the cryptocurrency market.

MEV, also known as maximal extractable value, is a characteristic of cryptocurrency trading that shares similarities with arbitrage in conventional markets. Essentially, MEV refers to the maximum potential profit that validators can generate by reordering or optimizing transactions within a block. Although this practice is technically legal, it has been compared to front-running by some critics.

MEV-Boost, a software developed by Flashbots, is the primary tool used by Ethereum validators to counteract certain contentious MEV practices. This software enables validators to request blocks from a network of builders and earn MEV by connecting to MEV-Boost via relays.

As a component of their MEV incentives, validators receive a portion of both the transaction fees associated with the block they propose and the MEV contained within the block.

With the emergence of the PEPE meme coin craze, transaction fees soared to new heights, leading to validators reaping significant profits from the increased fees.

Typically, in such scenarios, the majority of a validator's income is derived from MEV, but in instances where gas fees surge, validators can also capitalize on this opportunity to generate more revenue.

MEV-Boost Payments during PEPE coin craze (mevboost.pics)

Given that 85% of Ethereum validators are integrated with MEV-Boost, a significant portion of the MEV activity data is obtained through this source.

“In the end, block proposers (validators) make a lot of money if people pay high fees for their transactions,” said Toni Wahrstätter, an Ethereum researcher who tracks MEV-Boost activity with his dashboard.

The only instance when both MEV rewards and gas fees surpassed those during the PEPE craze was during the SVB bank run and the depegging of the USDC stablecoin.

Transaction fee rewards have been dwindling since the weekend, in tandem with the decline in price of PEPE and its listing on the centralized exchange Binance.

Source Coindesk