The Hidden Cost of Bundler MEV Recycling

Bundlers can front-run or back-run their own users' settled transactions, extracting value that should be final. This turns transaction finality into a probabilistic game, undermining the core promise of user-centric design.

• Re-extraction Loops: Profits from one user's swap are immediately used to sandwich the next.
• Trust Assumption Broken: Users must trust the entity that just executed their transaction not to immediately exploit it.

The only credible long-term fix is to formalize the roles and separate economic incentives at the protocol level, akin to Ethereum's PBS.

• Enshrined Intent Solver Marketplace: A decentralized, auction-based solver network for execution, not sequencing.
• Credibly Neutral Sequencer: A protocol-mandated, rotating entity (or set) orders transactions, removing the bundler's ability to reorder for MEV.
• Fee Burning Mechanism: A portion of recycled MEV is burned, disincentivizing the practice and benefiting the protocol.

Without protocol-level fixes, the economic power of MEV recycling will lead to vertical integration and centralization, mirroring L1 mining pools.

• Bundler-Solver Cartels: Entities like UniswapX solvers and Across relayers could merge, controlling the full flow.
• Barrier to Entry: New bundlers cannot compete without access to recycled MEV streams, leading to oligopoly.
• Vendor Lock-in: Applications become dependent on a few bundled liquidity providers, reducing composability.

While not a full solution, cryptographic techniques can shield users from the worst effects, forcing bundlers to compete on execution quality.

• Threshold Encryption: Transactions are encrypted until a random, future block (e.g., Shutter Network).
• Commit-Reveal Schemes: Users commit to intents without revealing full details, preventing front-running.
• Cost: Adds ~200-500ms latency and complexity, but protects high-value transactions.

Intent-based architectures like UniswapX and CowSwap were designed to solve MEV. By outsourcing to competitive searchers, they've simply shifted the MEV battlefield to a new, less transparent layer.

• MEV Migration: Value extraction moves from public mempools to private bundler order flows.
• Reduced Transparency: Off-chain auction dynamics are harder to audit than on-chain blocks.
• Regulatory Risk: Concentrated control of transaction ordering attracts scrutiny.

The industry lacks a standard for measuring finality safety. Time-to-Exploit measures how long after a transaction is considered 'done' it remains vulnerable.

• Current TTE: In systems with aggressive recycling, TTE can be indefinite.
• Target TTE: A secure system should aim for TTE = 0 after a reasonable confirmation window (e.g., 1 block).
• Monitoring: Protocols must publish TTE metrics to hold bundlers accountable.

When a bundler extracts MEV and re-submits the user's transaction, it invalidates the original latency and cost assumptions. This creates a poor, unpredictable UX.

• Guaranteed Failure: Time-sensitive transactions (e.g., liquidations, arbitrage) fail if delayed.
• Cost Instability: Users pay for a failed bundle, then pay again for the re-bundled tx.
• Trust Erosion: The abstraction layer becomes a source of risk, not a shield.

To prevent frontrunning and recycling, transactions must be hidden until execution. This requires new infrastructure primitives.

• SUAVE: Aims to be a decentralized block builder and encrypted mempool.
• Shutter Network: Uses threshold encryption for transaction privacy.
• Key Result: MEV is extracted competitively once, not repeatedly by the same entity.

The bundler, solver, and block builder functions must be separated and incentivized to compete. Monolithic stacks (like some L2 sequencers) are the problem.

• Bundler Role: Authenticate & forward. Should not solve or build.
• Solver Role: Compete in open auctions (see CowSwap, UniswapX).
• Builder Role: Aggregate winning bundles and submit to L1.

Builders must optimize for deterministic finality, not just low cost. A transaction that gets recycled has infinite effective finality time.

• User-Centric KPI: Measure end-to-end success rate and time-to-inclusion.
• Protocol Design: Integrate with secure cross-chain messaging like LayerZero or Axelar only after local finality is assured.
• Investor Lens: Back infra that provides verifiable execution proofs, not just cheap txns.

Across uses a slow relay/fast relay model with on-chain verification, creating a natural economic disincentive for MEV recycling.

• Slow Relay: Posts bond, fills user request, gets reimbursed later. No benefit to reordering.
• Fast Relay: Competes to fulfill instantly, but cannot alter the user's signed transaction.
• Result: The system's architecture aligns incentives, making recycling unprofitable.

A bundler that also operates a solver and a private mempool is a centralized MEV cartel. This creates maximal extractable value for the operator, not the user.

• Due Diligence: Scrutinize infra stacks for role separation and permissionless access.
• Bullish On: Specialized, modular providers (e.g., dedicated encrypted mempools).
• Bearish On: 'Full-stack' bundlers that don't publish their ordering rules.