Lioba Heimbach

Rainer Feichtinger, Florian Grötschla, Lioba Heimbach et al.

The Bitcoin Lightning Network is a layer 2 protocol designed to facilitate fast and inexpensive Bitcoin transactions. It operates by establishing channels between users, where Bitcoin is locked and transactions are conducted off-chain until the channels are closed, with only the initial and final transactions recorded on the blockchain. Routing transactions through intermediary nodes is crucial for users without direct channels, allowing these routing nodes to collect fees for their services. Nodes announce their channels to the network, forming a graph with channels as edges. In this paper, we analyze the graph structure of the Lightning Network and investigate the statistical relationships between node properties using machine learning, particularly Graph Neural Networks (GNNs). We formulate a series of tasks to explore these relationships and provide benchmarks for GNN architectures, demonstrating how topological and neighbor information enhances performance. Our evaluation of several models reveals the effectiveness of GNNs in these tasks and highlights the insights gained from their application.

Wenhao Wang, Aditya Saraf, Lioba Heimbach et al.

On high-throughput, low-fee blockchains, a qualitatively new form of maximal extractable value (MEV) has emerged: searchers submit large volumes of speculative transactions, whose profitability is resolved only at execution time. We refer to this as spam MEV. On major rollups, it can at times consume more than half of block gas, even though only a small fraction of probes ultimately results in a trade. Despite growing awareness of this phenomenon, there is no principled framework for understanding how blockchain design parameters shape its prevalence and impact. We develop such a framework, modeling spam transactions competing for on-chain opportunities under a competitive equilibrium that drives their profits to zero, and deriving equilibrium spam volumes as a function of block capacity, minimum gas price, and the transaction fee mechanism. Empirical evidence from Base and Arbitrum supports the model: spam grew sharply as block capacity was scaled up and fell when minimum gas prices were introduced. Our analysis yields three main insights. First, spam is always costly: when block capacity is scarce, it displaces users and drives up gas prices; as block capacity grows, it increasingly consumes execution resources, raising network externality, i.e., the cost of provisioning and processing blocks. We show that spam takes an increasing share of each additional unit of block capacity, so capping it before all users are included creates a favorable trade-off: forgoing a small amount of user welfare eliminates disproportionate spam and externality. Second, we extend the analysis to priority fee ordering and show that ordering transactions by gas price helps reduce spam, as spammers must pay more to reach early block positions. Third, as user demand grows and blockspace is scaled accordingly, spam's share of block capacity plateaus rather than growing indefinitely.

Lioba Heimbach, Roger Wattenhofer

Predatory trading bots lurking in Ethereum's mempool present invisible taxation of traders on automated market makers (AMMs). AMM traders specify a slippage tolerance to indicate the maximum price movement they are willing to accept. This way, traders avoid automatic transaction failure in case of small price movements before their trade request executes. However, while a too-small slippage tolerance may lead to trade failures, a too-large slippage tolerance allows predatory trading bots to profit from sandwich attacks. These bots can extract the difference between the slippage tolerance and the actual price movement as profit. In this work, we introduce the sandwich game to analyze sandwich attacks analytically from both the attacker and victim perspectives. Moreover, we provide a simple and highly effective algorithm that traders can use to set the slippage tolerance. We unveil that most broadcasted transactions can avoid sandwich attacks while simultaneously only experiencing a low risk of transaction failure. Thereby, we demonstrate that a constant auto-slippage cannot adjust to varying trade sizes and pool characteristics. Our algorithm outperforms the constant auto-slippage suggested by the biggest AMM, Uniswap, in all performed tests. Specifically, our algorithm repeatedly demonstrates a cost reduction exceeding a factor of 100.