Bitcoin MEV Without Flashbots: The Unbundled Frontier

Without a dominant relay like Flashbots, searchers compete in a public mempool, revealing strategies and driving up fees for everyone. This creates a winner's curse and frontrunning free-for-all.\n- High Cost: Bidding wars inflate transaction fees for all users.\n- Strategy Leakage: Complex MEV bundles are exposed before execution.

OCEAN implements a decentralized, non-custodial Proposer-Builder Separation (PBS) model. Builders commit to blocks via a native Bitcoin covenant, eliminating the need for trusted relays.\n- Censorship Resistance: No single entity can filter transactions.\n- Capital Efficiency: Uses native BTC staking, not off-chain reputation.

Protocols like Sovryn and Liquid Network enable private order flow and atomic composability. This creates a permissionless MEV supply chain where users can capture value.\n- Value Capture: Users can receive back-run payments via MEV-Share models.\n- Atomic Arbitrage: Enables complex DeFi strategies across Bitcoin layers.

Without a commit-reveal scheme, searchers can scan the mempool and frontrun profitable transactions with higher fees. This creates a toxic environment for users and enables Time-Bandit attacks, where miners can reorg the chain to steal settled transactions. This undermines finality and user trust.

The most profitable MEV strategies require massive, low-latency mempool surveillance and the hashpower to execute reorgs. This creates a winner-take-all dynamic, incentivizing mining pool consolidation. Smaller, honest miners are priced out, directly threatening Bitcoin's core decentralization ethos.

A fragmented, first-price auction for block space is economically inefficient. Users overpay in fee bidding wars, while the vast majority of value extracted leaks to miners instead of being returned to users or the protocol. This is a direct tax on the ecosystem, unlike the builder-proposer separation model pioneered by Flashbots and PBS.

The only robust fix is at the consensus layer. Proposals like BitVM-based challenge games or OP_CAT-enabled covenants could allow for enforceable fair ordering rules. This moves the MEV game from a pure resource war to a verifiable, cryptographic one, similar to ideas explored by Espresso Systems and Astria on other chains.

Adapt Ethereum's PBS framework. A neutral, open-source relay-builder network (like the Flashbots SUAVE vision) could separate block building from proposal. This creates a competitive builder market, returns MEV to validators/users via bids, and mitigates reorgs through committed headers.

Obfuscate the transaction graph to eliminate extractable opportunities. Widespread adoption of P2P-encrypted mempools (like Solana's Jito), coinjoins, or signature aggregation (Schnorr) reduces the attack surface. If searchers can't see the profitable arb, they can't frontrun it.

Without a Flashbots-like relay, user transactions are fully exposed to miners. This leads to:\n- Front-running on DEXs like Liquid Network or Rootstock\n- Sandwich attacks on BRC-20 and Runes minting\n- Failed transactions due to block space competition

Protocols like Liquidium and Babylon are creating MEV-aware markets. The core mechanism is auctioning block space priority.\n- Replace-by-Fee (RBF) allows users to outbid attackers\n- Transaction ordering becomes a explicit, paid-for service\n- Enables fairer and more predictable inclusion

The real MEV battleground is shifting to Bitcoin L2s. Architectures like Stacks, BitVM, and Merlin Chain create isolated execution environments.\n- Custom sequencers can implement MEV capture/redistribution\n- Sovereign chains enable intent-based systems like UniswapX\n- Data availability secured by Bitcoin L1

Forward-thinking protocols are baking MEV management into their core design, similar to Cosmos or EigenLayer.\n- MEV redistribution to token holders or stakers\n- Encrypted mempools using FROST or Zk-proofs\n- Threshold signing to prevent unilateral extraction