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Documents authored by Heimbach, Lioba

Document
DOI: 10.4230/LIPIcs.OPODIS.2023.8
A Fair and Resilient Decentralized Clock Network for Transaction Ordering

Authors: Andrei Constantinescu, Diana Ghinea, Lioba Heimbach, Zilin Wang, and Roger Wattenhofer

Published in: LIPIcs, Volume 286, 27th International Conference on Principles of Distributed Systems (OPODIS 2023)

Abstract
Traditional blockchain design gives miners or validators full control over transaction ordering, i.e., they can freely choose which transactions to include or exclude, as well as in which order. While not an issue initially, the emergence of decentralized finance has introduced new transaction order dependencies allowing parties in control of the ordering to make a profit by front-running others' transactions. In this work, we present the Decentralized Clock Network, a new approach for achieving fair transaction ordering. Users submit their transactions to the network’s clocks, which run an agreement protocol that provides each transaction with a timestamp of receipt which is then used to define the transactions' order. By separating agreement from ordering, our protocol is efficient and has a simpler design compared to other available solutions. Moreover, our protocol brings to the blockchain world the paradigm of asynchronous fallback, where the algorithm operates with stronger fairness guarantees during periods of synchronous use, switching to an asynchronous mode only during times of increased network delay.
Cite as

Andrei Constantinescu, Diana Ghinea, Lioba Heimbach, Zilin Wang, and Roger Wattenhofer. A Fair and Resilient Decentralized Clock Network for Transaction Ordering. In 27th International Conference on Principles of Distributed Systems (OPODIS 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 286, pp. 8:1-8:20, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2024)

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@InProceedings{constantinescu_et_al:LIPIcs.OPODIS.2023.8,
  author =	{Constantinescu, Andrei and Ghinea, Diana and Heimbach, Lioba and Wang, Zilin and Wattenhofer, Roger},
  title =	{{A Fair and Resilient Decentralized Clock Network for Transaction Ordering}},
  booktitle =	{27th International Conference on Principles of Distributed Systems (OPODIS 2023)},
  pages =	{8:1--8:20},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-308-9},
  ISSN =	{1868-8969},
  year =	{2024},
  volume =	{286},
  editor =	{Bessani, Alysson and D\'{e}fago, Xavier and Nakamura, Junya and Wada, Koichi and Yamauchi, Yukiko},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.OPODIS.2023.8},
  URN =		{urn:nbn:de:0030-drops-194989},
  doi =		{10.4230/LIPIcs.OPODIS.2023.8},
  annote =	{Keywords: Median Validity, Blockchain, Fair Ordering, Front-running Prevention, Miner Extractable Value}
}
Document
DOI: 10.4230/LIPIcs.AFT.2023.9
DeFi Lending During The Merge

Authors: Lioba Heimbach, Eric Schertenleib, and Roger Wattenhofer

Published in: LIPIcs, Volume 282, 5th Conference on Advances in Financial Technologies (AFT 2023)

Abstract
Lending protocols in decentralized finance enable the permissionless exchange of capital from lenders to borrowers without relying on a trusted third party for clearing or market-making. Interest rates are set by the supply and demand of capital according to a pre-defined function. In the lead-up to The Merge: Ethereum blockchain’s transition from proof-of-work (PoW) to proof-of-stake (PoS), a fraction of the Ethereum ecosystem announced plans of continuing with a PoW-chain. Owners of ETH - whether their ETH was borrowed or not - would hold the native tokens on each chain. This development alarmed lending protocols. They feared spiking ETH borrowing rates would lead to mass liquidations which could undermine their viability. Thus, the decentralized autonomous organization running the protocols saw no alternative to intervention - restricting users' ability to borrow. We investigate the effects of the merge and the aforementioned intervention on the two biggest lending protocols on Ethereum: AAVE and Compound. Our analysis finds that borrowing rates were extremely volatile, jumping by two orders of magnitude, and borrowing at times reached 100% of the available funds. Despite this, no spike in mass liquidations or irretrievable loans materialized. Further, we are the first to quantify and analyze hard-fork-arbitrage, profiting from holding debt in the native blockchain token during a hard fork. We find that arbitrageurs transferred tokens to centralized exchanges which at the time were worth more than 13 Mio US$, money that was effectively extracted from the platforms' lenders.
Cite as

Lioba Heimbach, Eric Schertenleib, and Roger Wattenhofer. DeFi Lending During The Merge. In 5th Conference on Advances in Financial Technologies (AFT 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 282, pp. 9:1-9:25, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

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@InProceedings{heimbach_et_al:LIPIcs.AFT.2023.9,
  author =	{Heimbach, Lioba and Schertenleib, Eric and Wattenhofer, Roger},
  title =	{{DeFi Lending During The Merge}},
  booktitle =	{5th Conference on Advances in Financial Technologies (AFT 2023)},
  pages =	{9:1--9:25},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-303-4},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{282},
  editor =	{Bonneau, Joseph and Weinberg, S. Matthew},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2023.9},
  URN =		{urn:nbn:de:0030-drops-191985},
  doi =		{10.4230/LIPIcs.AFT.2023.9},
  annote =	{Keywords: blockchain, Ethereum, lending protocol, hard fork}
}
Document
DOI: 10.4230/LIPIcs.DISC.2023.6
Base Fee Manipulation in Ethereum’s EIP-1559 Transaction Fee Mechanism

Authors: Sarah Azouvi, Guy Goren, Lioba Heimbach, and Alexander Hicks

Published in: LIPIcs, Volume 281, 37th International Symposium on Distributed Computing (DISC 2023)

Abstract
In 2021 Ethereum adjusted the transaction pricing mechanism by implementing EIP-1559, which introduces the base fee - a network fee that is burned and dynamically adjusts to the network demand. The authors of the Ethereum Improvement Proposal (EIP) noted that a miner with more than 50% of the mining power could be incentivized to deviate from the honest mining strategy. Instead, such a miner could propose a series of empty blocks to artificially lower demand and increase her future rewards. In this paper, we generalize this attack and show that under rational player behavior, deviating from the honest strategy can be profitable for a miner with less than 50% of the mining power. We show that even when miners do not collaborate, it is at times rational for smaller miners to join the attack. Finally, we propose a mitigation to address the identified vulnerability.
Cite as

Sarah Azouvi, Guy Goren, Lioba Heimbach, and Alexander Hicks. Base Fee Manipulation in Ethereum’s EIP-1559 Transaction Fee Mechanism. In 37th International Symposium on Distributed Computing (DISC 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 281, pp. 6:1-6:22, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

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@InProceedings{azouvi_et_al:LIPIcs.DISC.2023.6,
  author =	{Azouvi, Sarah and Goren, Guy and Heimbach, Lioba and Hicks, Alexander},
  title =	{{Base Fee Manipulation in Ethereum’s EIP-1559 Transaction Fee Mechanism}},
  booktitle =	{37th International Symposium on Distributed Computing (DISC 2023)},
  pages =	{6:1--6:22},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-301-0},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{281},
  editor =	{Oshman, Rotem},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.DISC.2023.6},
  URN =		{urn:nbn:de:0030-drops-191325},
  doi =		{10.4230/LIPIcs.DISC.2023.6},
  annote =	{Keywords: blockchain, Ethereum, transaction fee mechanism, EIP-1559}
}
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