Wipeout on the Blockchain

So, picture this: Makina Finance just lost 1,299 ETH, or roughly $4.13 million, in a ninja-like attack involving flash loans and oracle manipulation. Yep, money just vanished into thin air! The attackers drained the protocol’s funds and splashed the transaction across Ethereum’s public mempool like it was fireworks on New Year’s Eve. But instead of the validators jumping into action, guess who showed up? An MEV builder with the address 0xa6c2 swooped in to “save the day” and redirected those sweet, sweet funds into their own custody before the hacker knew what hit them.

The Aftermath

Now, thanks to this twist of fate, Makina’s users didn’t lose everything. Sounds like a happy ending, right? But hold your horses! The real story here is about who got to keep those funds and what this means for the crypto landscape when it comes to emergency response—or lack thereof.

The New Gatekeepers

The main players aren’t the hackers or the protocols anymore. No, the spotlight is on those block-building folks who intervened, deciding who gets their cash back and under which conditions. MEV bots and builders have become the last line of defense in crypto, but not by any glorious design. They’re operating from a position of power that raises eyebrows. Concentrating all this rescue ability in hands that are just out to maximize profit? Now that’s a pickle!

History Repeats Itself

This isn’t a solo episode either. Chainalysis observed a similar pattern during the 2023 Curve and Vyper exploit when white hat hackers and MEV bot operators teamed up to rescue funds, lowering losses along the way. So, what’s the deal? Exploits or rescue attempts that splash across public transaction channels invite a race among savvy searchers and builders ready to snag a piece of the pie—or maybe even to save the day.

How It Works: The Rescue or the Heist?

When a hacker’s dastardly transaction hits the public mempool, MEV searchers are on the lookout for juicy opportunities. If they spot a draining transaction, they can swiftly concoct a competing transaction to send those funds right into their own pockets instead of the hacker’s. And voilà! If lucky, the hacker’s wicked plan just exploded with a grand FAIL!

Profit with a Hint of Heroism

Sure, this sounds like a hero saving the day, but it’s really just clever profit extraction playing dress-up. These MEV strategies might act as a safety net in real-time exploits, but relying on them means playing a risky game, where rules are made up as we go along.

Concentration Trouble

But here comes the kicker: in Ethereum’s block production scene, MEV-Boost is king, processing around 93.5% of blocks! And out of all those blocks, two major relays are hogging over half of the action. With the rescue power in so few hands, the governance can turn into a real circus fast. If these builders end up holding the rescued funds, who gets to write the rules? Are they charging an arm and a leg just to give back something that isn’t even theirs?

The Ongoing Dilemma

Take what happened with Makina— the funds went into the builder’s pocket, but there’s no plan, no public service agreement, and no clear path back to the users. They could hand it back, demand a ransom, or just play around like it’s Monopoly money!

Private Routing Chaos

Now, the plot thickens. There’s a rising trend of private routing of transactions where vulnerable users migrate to stealth channels after being “sandwiched” by MEV bots. Sound sinister? It is! Meanwhile, BNB Chain’s Good Will Alliance is scrambling to block those nasty sandwich attacks.

A Glimmer of Hope: Safe Harbor

Enter the Safe Harbor framework created by SEAL, aiming to dodge the whole “MEV builder as unintentional custodian” mess. It’s designed to give protocols the power to pre-authorize white hats (because who doesn’t love a superhero?) with clear terms on how to get those funds back safely.

Boosting Recovery Rates

SEAL guarantees rescued funds should return to designated addresses within 72 hours, all while providing enforceable bounty structures. Talk about organizing a rescue mission like it’s a military operation!

Fast Response and Accountability

Immunefi is taking this a step further by operationalizing Safe Harbor with tight terms, demanding $#!* be sorted out within six hours. Blink, and you might miss your chance! But remember, this doesn’t completely sever ties with the MEV infrastructure. It just tries to formalize the chaotic mess.

Looking Ahead

Think of the potential outcomes— in a perfect world, the rescue layer becomes professional, protocols tighten their response windows, and we all live happily ever after. But if the builders do not play fair? We might find ourselves trapped in a nightmare where rescue operations become less transparent and more monopolized.

The Bottom Line

As MEV bots scrurgle their way into becoming an emergency-response feature for crypto—whether it’s wanted or not—Safe Harbor attempts to shift the narrative into something a little more predictable and accountable. But it’s still a gamble, and as we saw with Makina, sometimes those assumptions go right out the window. Welcome to the wild west of the blockchain, folks!