Block space is paramount for cryptocurrencies, especially major coins such as Bitcoin and Ethereum. Although Ethereum is accolated by fans in the community for becoming a deflationary cryptocurrency with its recent changes, usability will matter the most in the long run. For Ethereum to succeed, it will need to continuously scale and optimize user experience. While containing fees below reasonable levels is necessary, scaling the Ethereum blockchain at a faster speed will be the goal. And how well this is achieved will be a significant driver of the price of ETH.
Put simply, block space holds the key. In this article, we will explore income opportunities

The Evolution of Ethereum’s Block Space

In the early days of Ethereum, most block producers were independent individuals or small groups who used personal computers or small servers to run Ethereum nodes and provide computing power. These block producers, called miners, used mining software to compete to solve complex mathematical problems and add new blocks to the blockchain. They were rewarded with newly minted ETH and transaction fees in return for their efforts. With the development of the Ethereum network, many miners started to use professional-grade mining rigs to improve efficiency and operate data centers that house many mining rigs to get better bandwidth. This led to intensified competition and increased demand for computing resources and electricity. As the Ethereum network switched to the PoS (Proof of Stake) mechanism, the role of block producers changed with it. Ethereum PoS is a new type of consensus mechanism that allows Ethereum nodes to participate in consensus to ensure data on the blockchain is consistent and tamperproof. It improves overall efficiency by allowing for more efficient resource allocation.

Miner Economy

In a PoS system, miners receive deposit rewards instead of mining rewards as in a PoW (Proof of Work) system. With Ethereum’s shift to PoS, block producers’ income structure has undergone significant changes. Firstly, since PoS does not require miners to invest a lot of computing power, they will no longer need to buy expensive mining machines, leading to a significant reduction in miner income. Secondly, in a PoS system, miner income primarily comes from deposit rewards, rather than mining rewards, which means that miner income will become less stable. Thirdly, in a PoS system, PoS node operators will have the opportunity to earn more income, which also means that the income of ordinary miners will relatively decrease. Before the Ethereum Merge, miner income mainly came from block rewards and transaction fees. With the implementation of EIP1559, part of the transaction fee will be burned, leading to a decrease in miner income. Additionally, as Ethereum moves from PoW to PoS, miners no longer need to consume a lot of electricity to mine Ethereum, leading to a reduction in miner costs. However, miners who continue to run PoW nodes will face increasingly fierce competition because they will compete with fewer and fewer PoW nodes to obtain block rewards and transaction fees. At the same time, the explosion in block space demand has driven up the average gas fee, creating a primitive Ethereum net supply crunch. However, as congestion is resolved and fees are reduced, Ethereum’s overall supply continues to increase. The PoS mechanism implemented through the merger significantly reduces Ethereum’s net issuance, creating conditions for Ethereum’s supply deflation.

Validator Economy

In PoS consensus, the validator economy replaces the miner economy. Validators are responsible for verifying new transactions and adding them to the blockchain. Unlike PoW, PoS does not require validators to produce blocks by solving computational puzzles, but rather selects validators based on the amount of ETH tokens they hold and stake in the network. This means that validators with more ETH tokens have more say in the process. Additionally, PoS comes with a new incentive mechanism to encourage validators’ participation. In PoS, validators can receive transaction fees as a reward for producing blocks. This is different from PoW, where miners can only receive newly minted Ethereum tokens as a reward. The change in the role of block space includes two aspects: one is the improvement of the Ethereum block space itself, and the other is the development of new functions and roles in the block ecosystem.

The focus of the role of Ethereum blocks has undergone significant changes, from simple blockchain nodes in the past to full blockchain nodes that include verification, storage, support, and maintenance functions. This development gives participants in the Ethereum block space more responsibilities and obligations, while also bringing more incentives and profit opportunities. Furthermore, the ecosystem of Ethereum blocks is constantly evolving, including more developers and capital participation, as well as more community activities. As the participation of the Ethereum developer community increases, the role of block producers is also evolving, from pure block producers to various roles such as voting, contributing code, and participating in community activities.

MEV and the Relationship with Block Space

MEV (Maximal Extractable Value) refers to the maximum value that validators can extract from producing blocks that exceed the standard block reward and gas fees by adding, removing, and changing the order of transactions in a PoS system. Nowadays, MEV generally refers to the maximum extractable value of transactions. In the Ethereum network, the MEV ecosystem includes searchers, builders, and relayers. Searchers run MEV strategies and send transaction sequences to builders. Builders aggregate transactions from searchers and other sources to construct blocks, and relay the most profitable blocks to proposers through relayers. Throughout this process, searchers need to trust that builders will not steal or front-run transactions, builders need to trust that relayers will relay the most profitable blocks, and relayers need to accurately evaluate and relay the most profitable blocks while ensuring payment.

Attraction of MEV

MEV plays an important role in the Ethereum PoS ecosystem by improving the efficiency of DeFi and allowing searchers to quickly close price gaps. Since MEV is a lucrative source of income, it is also a driving force for maintaining the blockchain system. In theory, the more active on-chain transactions, the higher the upper limit of MEV. After the Ethereum merge, MEV is very attractive to validators. In addition to higher minimum staking yields, validators can earn considerable income, with the highest MEV-Boost validator reward currently awarded to Lido. Since the merge, MEV-Boost has been widely adopted, with nearly 90% of validators running it. After the merge upgrade, most MEV revenue flows into the hands of validators, as they replace miners as the core of the network. That is, the value of a user’s transactions within the Ethereum blockchain space will be captured by roles such as validators. In the long run, Ethereum will implement sharding technology and relayers will no longer be needed. MEV-Boost allows validators to maximize their staking rewards by selling their block space on open and competitive block building markets. For large staking providers like Lido, this means more stable staking income. MEV-Boost, built in collaboration between Flashbots and Ethereum core developers, is a software that allows validators to connect to multiple off-chain markets to auction block space. Through this relayer model, validators receive blocks containing priority fees and MEV built by third-party block builders.

MEV and Ethereum blocks are closely related. After Ethereum shifts to PoS, as the process of becoming a validator becomes more democratized, the threshold for accessing MEV is further lowered. With further Ethereum deflation and increased validator income, the attractiveness of MEV is greatly enhanced. From a philosophical perspective, MEV acts as a value transfer layer between users and the Ethereum network.

MEV self-bondage

MEV is a zero-sum game. Opportunities to extract value from transaction reordering are limited, and the fastest identifier of MEV opportunities is typically the searcher who earns the most MEV. To maximize profits, competing searchers write scripts to automatically execute tasks that exploit easily identifiable MEV opportunities. In addition, searchers can run specialized hardware or subscribe to paid services that provide low-latency views of the Ethereum mempool to more quickly exploit pending user transactions. To outcompete other searchers, experienced and savvy searchers may deploy complex strategies, including multiple token swaps, bots, and manual searching through on-chain activity, to achieve higher profits. This effectively blocks ordinary Ethereum users from participating in MEV, as participants must be professional in order to compete.

Furthermore, MEV can sometimes negatively impact user experience, such as when attacked users face higher slippage and poorer user experience, and sometimes searchers dramatically increase gas prices due to gas priority fees, leading to network congestion. The lucrative rewards for staking ETH give large liquidity providers a scale advantage in MEV adoption over individual stakers and regular staking pools, leading to a “winner takes all” scenario. Outside of centralized exchanges, the only other entities well-suited to compete as staking pools are services that offer users liquidity staking derivatives (LSDs), which are likely to have the highest DeFi market depth in the near future. The appeal of MEV will lead to “winner takes all” scenarios for large staking pools, further exacerbating centralization of validators.

Response

The ideal state of the MEV market from a theoretical perspective is a healthy and fully competitive landscape. In this scenario, the MEV market would be highly competitive, with multiple vendors vying to provide the best service and pricing. This would create a level playing field for all participants, enabling them to benefit from the most competitive terms. However, in practice, after the transition to PoS, whoever can generate the most gas will have control over everything in the Ethereum network. The Ethereum blockchain network will no longer be verified and recorded by ordinary miners, but by more specialized nodes called validators. After the transition, the Ethereum blockchain network will focus more on transaction fees rather than mining fees, which also means that transaction fee revenue will become the main source of income for validators. Therefore, under the PoS mechanism, there will likely be a significant amount of MEV monopolisation, where specific nodes have enough power to obtain more transaction fees.

The MEV competition structure after the Ethereum merger is primarily composed of several block builders, with the market currently dominated by five builders, but there have been some new builders emerging recently, such as builder0x69, beaverbuild, and 0x4737, among others. Flashbots is one of the largest builders, running its own builder and relay, and has open-sourced its builder to encourage competition. Other builders such as bloXroute, Eden, sendbundle.eth, and Manifold also have a certain market share in the competition. There is competition and cooperation among these builders, with different strategies adopted to obtain more order flow, such as reducing profits, providing rebates, competing for execution guarantees, and so on. There has not yet been a monopolizing builder, so balancing MEV revenue in the future will be a key issue. The MEV market should have a high level of security and resilience, making it an attractive option for investors and traders. All transactions will settle securely on the Ethereum blockchain, and the market will be protected from malicious actors through various security measures, including programmable privacy transactions, FRaaS, FSS, PBS, among others. MEV is becoming an investment strategy that investors can realize on Ethereum, and in the future, it can gain higher returns from derivative markets like LSD, unaffected by Ethereum network congestion and the technical proficiency of investors themselves.

Stagnant Interest Structure

In the long run, the interest structure of Ethereum’s block space seems to have become stagnant. Under the PoS consensus mechanism, the presence of validators has started to outweigh that of miners. Validators can earn money through staking, and the more they stake, the more rewards they receive. The amount of their stake also affects their power in the network, so they have an incentive to stake more Ethereum tokens in order to gain more rewards.

Underlying Censorship

Censorship issues in Ethereum’s block space are mainly manifested in signal interference and the existence of censorship nodes. Among them, Flashbots Relay is the most widely used censorship node. In addition, there are other censorship nodes, such as Bloxroute’s “Regulated” Relay. These censorship nodes result in many blocks being subject to censorship of user transactions. The root cause of this problem is the excessive reliance of censorship nodes such as Flashbots Relay on the MEV supply chain in Ethereum’s block space, making them vulnerable to regulatory restrictions and control. Currently, there are some solutions to the censorship problem, such as launching non-censorship nodes such as Gnosis, Ultrasound Money, and Builder 0x69 to increase Ethereum’s censorship resistance. However, the dominant position of Flashbots Relay has not significantly declined, as since its launch, Flashbots Relay has maintained a near-perfect record of normal operation and has the advantage of free and whitelist-free connections. These advantages make it one of the censorship nodes trusted by many validators and builders.

In Ethereum’s block space, stability is one of the most important competitive characteristics of censorship nodes. Therefore, as the stable operation time of Flashbots Relay becomes longer, it will become increasingly one of the censorship nodes trusted and used by all validators with MEV-Boost connections. Currently, companies such as Flashbots and bloXroute occupy an important position in the builder market, but the market is starting to diversify. However, the relay market is still dominated by Flashbots, which raises concerns about the censorship system of relays. The censorship system of relays may lead to block tampering, so builders hope to transmit their bids to relays that can connect to the most validators. At the same time, validators will also seek to connect to relays that are most profitable for them and can accurately pay profits. Therefore, Flashbots has become the preferred choice for most builders and validators, but this also leads to the risk of more and more blocks being subject to censorship.

The Dark Game

The transformation of mining pools is one of the potential impacts of the PoS mechanism. As mining pools may see themselves as independent nodes, this will result in large mining pools having significant power and earning more transaction fees. The temptation of validators to have a say in decision-making has led mining pools and super nodes to seek attractive staking services to attract more ETH holders to lock their ETH, which may inhibit the long-term vitality of Ethereum’s ecosystem and require further observation. Furthermore, Ethereum’s POS withdrawal process may face some complex issues. Socialized averaging and mismatched time periods are the main reasons for these problems, which may result in different forms of arbitrage/attack behavior. After the withdrawal is open, poorly designed protocols may result in “blackouts”. In this case, the following types of arbitrage/attack behavior may occur:

• It is possible for someone to monitor the POS network’s confiscation situation and preemptively purchase secondary market stETH. Then, when the secondary market depth is large, they can buy stETH and initiate a withdrawal request, causing operator nodes to exit on a large scale.
• Secondly, there may be bad actors who purchase stETH directly with the ETH collateralised by users, such as FraxETH, causing users’ collateral assets to suffer losses.
• In more extreme cases, operators may make large withdrawal requests without collateral and cooperate with operators to estimate confiscations. This could have a negative impact on the entire system. Therefore, to prevent these problems, it is necessary to conduct a thorough security assessment and risk control of Ethereum’s POS withdrawal process. At the same time, various arbitrage/attack behaviours need to be considered when designing protocols and appropriate preventive measures need to be taken. If the staking mechanism is not updated or changed in the short term, deterministic profits in the MEV track will still belong to those top staking protocols and super mining pools. The attractiveness of the profits generated by this fat can only be transmitted to small and medium-sized investors in Ethereum through these large service providers or protocols. Block builders’ reserved MEV directly affects their bid size when bidding for blocks. To make money, builders need to win some high-value blocks, but most of the time, they just barely break even or even lose money. Some profitable builders may receive private order flows. Meanwhile, builders can increase the funding in their own bids to increase the likelihood of blocks being selected, thereby increasing order flows and earning more profits. In other words, these block builders and mining pools are building a barrier between Ethereum holders and the dark forest, which seems good in the short term but appears somewhat stagnant in the long term.

Bulky Consensus

There is a validator paradox in the Ethereum PoS mechanism, where validators must lock tokens and release them at some point in the future to participate in validation. If they cannot unlock, the PoS algorithm becomes a one-way process, which no one wants to participate in. Therefore, once tokens are released, the punishment constraints set at the consensus level have no further effect on validators. In this case, the punishment constraint mechanism of the Ethereum PoS algorithm cannot limit validator behaviour. The cost of consensus validation in the Ethereum PoS algorithm increases with the number of validators. This is because in PoS, each validator corresponds to a state. If there are 100 validators, there are 100 states, 1,000 validators mean 1,000 states, and 10,000 validators result in 10,000 states. This has a profound impact on the operating costs of Ethereum nodes. The Ethereum PoS algorithm essentially separates the validator’s state from that of ordinary users. Validators still have states. Each node participating in consensus has a state, which causes a problem of state bloat and increases the cost of validation. The more validators there are, the lower the validation efficiency, so restrictions are necessary. In addition, in the PoS algorithm, block producers need to stay in constant communication with others and collect signatures from other witnesses, which results in a significant communication cost. Furthermore, when other witnesses do not know the network address of the signature collector, they need to send signatures in a broadcast manner, further increasing communication costs. These issues all have an impact on the operating costs of Ethereum nodes.

Centralized Monopoly

The centralization monopoly issue in the Ethereum block space is concerning because block-building activity is likely to concentrate in a few specialised entities outside of relay scrutiny. Validators have privileged positions to construct, propose, and validate blocks, which is a resource-intensive activity. Validators must run multiple block simulations in extremely short periods to determine the block that maximises rewards. This makes large and complex staking pools advantageous over independent validators since the former can invest in the best block-building solutions. However, this can make MEV a centralized force in Ethereum. To avoid this, MEV-Boost separates block-building activity from validators, who are block proposers under PoS. However, outsourcing block-building activity to third-party block builders means that the block builder market may still become centralized. To mitigate the negative externalities of centralization of builders, Flashbots made minor adjustments to MEV-Boost software, where the most notable is that validators can set a minimum bid for the blocks they receive from the relay. By setting the minimum bid above zero, if the reward for a block built by a third-party builder is below a certain threshold, validator node operators can automatically build blocks from the Ethereum memory pool locally. In addition, Ethereum core developers are also committed to adjusting the Ethereum engine API to help validators more easily compare rewards for locally built blocks and blocks built by third-party builders. These adjustments help reduce the dominance of Flashbots builders and mitigate the risk of block builder centralization.

Currently, due to increasingly fierce builder competition, the dominance of Flashbots builders is gradually weakening. In addition, Ethereum core developers and the Flashbots team are discussing other solutions to further mitigate the negative externalities of block builder centralization.

Certain Opportunities

Overall, the development trend of MEV after the Ethereum merger needs to address the issues of censorship and centralized builders. Although some measures have been taken, continuous efforts are still needed. At the same time, establishing a decentralized builder network is also an important long-term solution to the problem.

MEV

MEV mainly includes three forms: 1. Risk-free arbitrage in DEX; 2. Liquidation in lending; 3. Sandwich attacks. Risk-free arbitrage in DEX is achieved by utilising on-chain data, combining price differences in DEX and flash loans for arbitrage. Liquidation in lending is achieved by querying on-chain data to determine which borrowers can be liquidated and then obtaining liquidation fees. Sandwich attacks are a trading attack that can be used to control prices by submitting transactions at high speed and prioritizing transaction order, thereby obtaining significant profits. Although there is a possibility of failure in MEV, the cost of failure is minimal, making this strategy still very popular. As more and more users enter the MEV market, the competition in the market becomes increasingly fierce. The profits of Searchers are being reduced, while the profits of Producers are increasing. From the current cumulative data, 64% of the total MEV profits are still dominated by algorithmic Searchers. In addition, although the MEV market also exists on other chains such as BSC and Avalanche, the competition on these chains is relatively weak, and the ceiling is also relatively low. Therefore, it is very possible that competition in the Ethereum MEV market will become more intense in the future, and the market pattern will also change accordingly.

The author believes that investing in MEV-related projects, such as cryptocurrency exchanges or staking pool entities that have the ability to provide staking services, is a good choice. These entities provide staking services by offering deposit returns and providing insurance for faults in validator technology. In addition, investment institutions can consider investing in MEV Searchers, which are entities that focus on trading using MEV strategies. However, due to more and more newcomers entering this field, the previously oligopolistic competition of Searchers has gradually turned into perfect competition, greatly reducing excess returns. Therefore, investment institutions need to carefully consider potential risks and returns. After the Ethereum merger, the development trend of MEV faces two major problems: censorship and centralized builders. For these issues, a series of solutions can be focused on. With the official launch of PBS, there will be no problem with relays. The separation between proposers and builders will be directly built into the Ethereum protocol. Validators will be able to add an “anti-censorship list” to force builders to include transactions. However, it should be noted that even if there is an oligopoly of builders, the risk of censorship will not be completely eliminated. In the long term, projects that truly contribute to establishing a decentralized builder network are worth attention, where there are not only many builders, but they also collaborate to build partial blocks to form a complete block.

DVT

DVT is a distributed validator technology that provides a solution to the centralization and single point of failure issues faced by the Ethereum protocol with its adoption of the PoS (Proof of Stake) consensus mechanism. DVT increases the fault tolerance and decentralization of Ethereum validators by dispersing validator responsibilities and private keys. The PoS reward mechanism can lead to a risk of power concentration as validators with more stake receive more rewards. Additionally, the PoS mechanism requires validators to sign two keys using a single machine, which may result in a single point of failure risk. DVT addresses these issues by using distributed key generation, multi-party computation, Shamir’s secret sharing, and Byzantine fault tolerance algorithms to distribute validator responsibilities among multiple nodes.

DVT has significant advantages, including reduced single point of failure risk through the use of distributed key generation and increased fault tolerance and decentralization through a multi-signature system. DVT provides higher fault tolerance and decentralization for Ethereum validators and partly addresses some of the issues faced by the PoS mechanism. Features to look out for in the DVT project include a completely decentralized architecture using key-sharing technology and MPC threshold schemes to manage the validator network, diverse validator clients to reduce single point of failure risk and increase fault tolerance, and a robust incentive mechanism to attract node operators to participate in the verification network’s operation while protecting operator interests.

Staking

Staking has become an entry point for Ethereum, and we will see this field grow with the expansion of some staking service protocols. Retail investors will authorize more transaction custody based on decentralized staking agreements. Protocols such as Lido have already become giant financial custodians around Ethereum, and this will generate more complex financial services for users of different scales. The launch of stSaaS staking service protocols such as Lido provides more users with the opportunity to participate in POS staking. Lido’s staking value has already exceeded $5.9 billion, surpassing MakerDAO as the DeFi ecosystem’s protocol with the highest TVL. Becoming a native staking node requires admission and locking thresholds and installing DAppNode to run. Additionally, node reliability has a significant impact on rewards and the node’s online time.

These thresholds make the native staking mode unsuitable for all users, leading to the emergence of three other staking modes: staking as a service (stSaaS), joint staking, and centralized exchanges. The stSaaS mode separates staking and node operation, with users only needing to deposit 32 ETH and entrust node operation to staking service providers such as Lido. This mode provides users with a more convenient way to participate in POS staking. Small to medium centralized exchanges can partner and compete with Lido, stSaaS, and other DeFi protocols to increase their attractiveness and competitiveness. By offering more financial services and staking options, small to medium centralized exchanges can attract more users and liquidity and stay unbeatable in a competitive market. Some cooperation and competition strategies include accessing Lido and other protocols as one of their staking options, offering staking services, and providing diversified financial services.

1. Integrating with protocols such as Lido: Small and medium-sized centralized exchanges can offer Lido as one of the staking options for their users’ ETH and other PoS tokens. This can improve the exchange’s liquidity and security, as staking can reduce the risk of malicious attacks and users can benefit from staking rewards. Additionally, exchanges can collaborate with more liquidity staking service protocols to provide more staking options, such as adding support for staking other PoS tokens.
2. Launching their own staking service: Small and medium-sized centralized exchanges can develop or collaborate to launch their own staking service. This allows users to stake their tokens on the exchange and earn rewards, thereby increasing user retention and engagement. The advantage is that exchanges can independently determine the proportion of staking rewards, which can be optimised according to their own situation.
3. Leveraging stSaaS’s staking model: stSaaS is a blockchain-based staking service provider that allows users to use their digital assets for lending, borrowing, and other financial services. Small and medium-sized centralized exchanges can integrate stSaaS’s staking model into their own exchange to provide more financial services, such as offering lending or borrowing functions. Exchanges can also collaborate with protocols such as MakerDAO to offer stablecoin lending services, which can increase user retention and engagement. For users, such combination products are more attractive.
4. NFT market + liquidity staking: Small and medium-sized exchanges can promote the development of the NFT market by providing liquidity staking services for NFT transactions. This can provide more liquidity for NFT holders and make it easier for them to buy and sell NFT assets. One idea is to combine NFTs with liquidity staking derivatives such as futures, options, etc. to provide users with more investment opportunities. By leveraging the uniqueness of NFTs and the leverage effect of DeFi derivatives, exchanges can create more revenue opportunities. At the same time, small and medium-sized exchanges can also use liquidity staking services to allow users to use their NFT assets as collateral to obtain lending services. This allows users to obtain funding liquidity while holding NFTs and support more NFT transactions.

Re-Staking

The re-staking solution has brought new opportunities to the Ethereum ecosystem. This solution allows Ethereum, lsdETH, and LP tokens to be staked as nodes on other public chains, oracles, and middleware to receive verification rewards, releasing the security of the ETH consensus layer. The re-staking solution has multiple narrative logics, including ETH consensus layer expansion, activation of LSD assets, and capturing real returns, making it an important driver for the next bull market in the ETH ecosystem. However, the solution also has some shortcomings that need to be addressed, such as upstream and downstream competition, and declining yields. Taking Eigenlayer as an example, its re-staking solution allows for the staking of “ETH-like value assets” as validation nodes, utilising the “violent means” of staking penalties to borrow the security of the main network. The security of the ETH network consensus layer is maintained by the “potential penalty risk” of staked funds, which is commonly known as violent means. Therefore, this solution fully utilises ETH’s biggest advantage - security - and expands the utility of the ETH consensus layer outward, similar to the shared security narrative of Cosmos 2.0. This brings new opportunities in the ETH ecosystem for the next bull run in the market.

Eigenlayer’s re-staking solution can be seen as a continuation of the LSD narrative. Although the Shanghai upgrade will bring an increase in the total amount of ETH staked, this is a stock market. Therefore, we should pay more attention to its upstream and downstream competition, upstream DVT, and downstream aggregators, lsdETH re-staking. In addition, lsdETH serves as a borrowing asset in DeFi rather than a trading asset, and its leveraged returns are limited, with yields gradually decreasing as the TVL scale grows. Therefore, external revenue support is needed for such a large lock-up amount. Eigenlayer’s re-staking solution can bring higher value to LSD assets.

Conclusion

The role of Ethereum block producers is rapidly evolving, and with the increase in community activity, their responsibilities and obligations are also increasing. The implementation of the PoS consensus mechanism will have a profound impact on miner income, especially in terms of reduced block rewards and transaction fees. However, the PoS mechanism can create deflationary conditions for Ethereum, increase network security, and improve network congestion. At the same time, MEV plays an important role in the Ethereum PoS ecosystem, enhancing the efficiency of DeFi and attracting more participants. For investing in MEV-related projects, it is recommended to focus on cryptocurrency exchanges or staking pool entities that offer staking services. These entities can provide staking services by offering deposit income to users and providing insurance for technical failures in validator setups. In addition, institutions may consider investing in projects that help establish a truly decentralized builder network. We believe that the interests of Ethereum are becoming clearer, and the presence of validators is beginning to surpass that of miners. The dependence on audit nodes such as Flashbots Relay in Ethereum block space leads to audit issues, and current solutions have not significantly reduced their dominance. Pool monopolies may also emerge, with validators and super nodes absorbing ETH holders’ locked assets, potentially suppressing ecosystem vitality. Ethereum’s PoS withdrawal process may face complex issues, resulting in different arbitrage/attack behaviours, such as monitoring PoS network forfeiture and rushing to the secondary market for stETH. These issues need to be taken seriously as they impact the Ethereum ecosystem. As we can see, the stSaaS model provides users with a more convenient way to participate in PoS staking. Small and medium-sized centralized exchanges can enhance their attractiveness and competitiveness by cooperating and competing with Lido, stSaaS, and other DeFi protocols. With the launch of stSaaS staking service protocols such as Lido, a more convenient way to participate in PoS staking is now available. Small and medium-sized centralized exchanges can increase their liquidity and security by integrating Lido as one of their options for ETH and other PoS token staking. Furthermore, by offering more LSD financial services and staking options, small and medium-sized exchanges can attract more users and liquidity and remain competitive in a fierce market.