Why Fair Ordering Cannot Coexist with Free Markets

Fair ordering is a market failure. In a free, permissionless system, the highest bidder for block space always wins. Protocols like Flashbots and PBS (Proposer-Builder Separation) formalize this reality, creating efficient markets for transaction ordering that are inherently unfair to users who cannot or will not pay.

Decentralization creates latency arbitrage. The network propagation delay between nodes is an exploitable resource. A validator in a low-latency, centralized location (e.g., an AWS data center) will always have a timing advantage over a globally distributed peer, making topological fairness impossible without centralized coordination.

Fairness requires a trusted coordinator. Systems like Aequitas or Themis that attempt fair ordering must introduce a centralized sequencer or a trusted committee. This creates a single point of failure and censorship, violating the core permissionless property of markets like Ethereum or Solana.

Evidence: The MEV-Boost auction on Ethereum proves the market's efficiency. Over 90% of Ethereum blocks are built via this free market, where builders compete purely on economic value, not fairness. Any attempt to impose fairness destroys this liquidity and efficiency.

Fair ordering requires a dictator. A single, trusted sequencer must order transactions to guarantee fairness properties like censorship resistance or MEV prevention. This creates a single point of failure and control, contradicting the decentralized ethos of protocols like Ethereum or Solana.

Free markets optimize for profit. In a permissionless system, validators and searchers on networks like Ethereum or Jito-Solana will always seek maximal extractable value (MEV). Any attempt to impose a 'fair' order that reduces profits will be bypassed via private mempools or off-chain auctions.

The conflict is structural, not technical. Projects like Flashbots SUAVE or CowSwap attempt to 'democratize' MEV, but they still rely on a centralized relay or solver to enforce rules. This central coordinator becomes the new bottleneck and attack vector, recreating the problem it aims to solve.

Evidence: Analyze any 'fair' sequencing layer. Espresso Systems or Astria must choose: enforce fairness and lose block builders to more profitable chains, or allow free competition and abandon the fairness guarantee. The market's profit motive always wins.

Priority Gas Auctions (PGAs) are equilibrium. In a free, open mempool, users compete for block space by bidding gas. This creates a pure price discovery mechanism where the highest bidder wins. Attempts to suppress this, like EIP-1559's base fee, only shift the auction to the tip.

Fair ordering is economically impossible. Any protocol-level ordering rule (e.g., first-come-first-served) creates a profitable arbitrage opportunity. Bots will immediately frontrun it, replicating the PGA dynamic off-chain. Projects like Flashbots SUAVE aim to internalize this competition, not eliminate it.

The market demands PGAs. High-value DeFi actions on Uniswap or Aave have quantifiable profit. Rational actors will pay up to that profit margin to secure execution. This is not a bug; it is the efficient allocation of a scarce resource (block space) by the market.

Evidence: MEV-Boost's dominance. Over 90% of Ethereum blocks are built by proposer-builder separation (PBS) via MEV-Boost, which formalizes PGA competition among builders. This proves the market's preference for explicit, efficient auctions over hidden, inefficient ones.

Fair ordering eliminates arbitrage. By enforcing a canonical transaction order, it removes the latency arms race that drives price discovery. This destroys the economic incentive for sophisticated actors like Jump Trading or Wintermute to provide liquidity and correct market inefficiencies.

Stagnation is the equilibrium. Without arbitrageurs, price discrepancies persist across DEXs like Uniswap and Curve. This creates a less efficient, fragmented market where user execution quality degrades over time, not improves.

The MEV subsidy disappears. In a free market, searchers pay high fees (e.g., via Flashbots) to access block space, subsidizing network security and user transaction costs. Fair ordering captures this value but fails to redistribute it effectively.

Evidence: Stagnant L2s. Early sequencers with fair ordering promises, like early versions of Arbitrum Nova, prioritized this feature over throughput and cost, capping their growth as users migrated to higher-performance, MEV-aware chains like Arbitrum One and Base.

Fair ordering is economically unviable. Block producers (e.g., Lido, Coinbase) and validators maximize revenue through MEV extraction; a protocol that enforces fairness destroys this revenue stream, creating a powerful incentive to fork or ignore the chain.

Sophisticated users will always circumvent it. Entities like Jump Trading or Wintermute will use private mempools (e.g., Flashbots Protect), off-chain agreements, or intent-based systems like UniswapX to achieve priority, rendering any on-chain fairness rule irrelevant for high-value transactions.

The result is a two-tiered system. The 'fair' public mempool becomes a low-value ghetto, while the real economic activity and security budget migrate to private channels. This stratification defeats the protocol's core purpose and centralizes power with those who can operate off-chain.