ConsenSys Researchers: DeFi Hacks Are Easier To Scale On ETH 2.0

Two Consensys researchers conducted an independent report this week exploring the economic review of the ETH 2.0 Serenity, which is the upcoming shift to a proof-of-stake mechanism for Ethereum. In our Ethereum latest news, we take a closer look.

Among the multiple takeaways, the one important to take note of according to the ConsenSys researchers is that attacks on ETH 2 are easier to scale than on ETH 1 and that network security was reliant on the price stability for ethereum. The researcher’s Tanner Hoban and Tom Borgers work in Corporate Development at Consensys but the report was their own, independent review. The researchers noted that physical and hardware-driven burdens of network participation “recede to minimal hardware and power consumption” referring to the minimum requirements to run one node compared to the current mining rigs.

Our investigation of $500k hack from @BalancerLabs multi-token pools with deflationary tokens 🕵️‍♂️ https://t.co/yCuYWpBAzM #DeFi

— 1inch.exchange (@1inchExchange) June 29, 2020

The trend is amplified as Defi advances as well. The researchers cautioned that flash loans, derivatives, and other products, could have adverse implications for the entire network. MakerDAO was hit hard with a similar scenario. Ethereum fell 45% over two trading sessions and the lenders lost their funds which resulted in more than $4 million as buyers grabbed ETH for free. A similar situation was exposed last month as the hackers drained Balancer pools out of $500,000. The attackers took advantage of the token that was available on Balancer by taking flash loans from other protocols and swapping between tokens.

@thomasborgers and I have been working on an Eth2 economic review in response to a @MolochDAO RFP. We've created a detailed economic model and developed frameworks for measuring Eth2 security and validator required rate of returns. More in our report: https://t.co/qXa6IcmDcK

— Tanner Hoban (@tehoban1) July 16, 2020

The researchers constructed a new model built in Excel with different outputs of the system under recommended specifications. As the experiment progressed they created a conclusion for factors such as costs, yields, revenues, and network issuances featuring Serenity. ETH 2.0 relies on more than 100 variables and all of them have a huge impact on system outputs as the model was able to show the profitability on different ETH prices and staked coins:

 “We define a required and sufficient level of economic security in Eth2.0 Phase 0 using a set of assumptions around the cost to attack the network. The objective is to make attacks costlier than the potential benefits of an attack and to achieve a similar level of security to the current Ethereum blockchain (Eth1).”

In the meantime, the researchers said that ETH 2.0 has fully dependent security on the total ETH staked which is basically a function of yields. The minimum yield of 3.3 percent is required by the validators to consider participation under the optimized network. The yield requirement increases to 11.6 once the market gets more stable. ETH 2.0 is much-more awaited but it is shaky in terms of the exact launch date.