Adversarial coordination is inevitable because blockchains are open, global state machines. Any actor can observe pending transactions and assemble a competing bundle for profit, a dynamic formalized in Maximal Extractable Value (MEV) research.
public-goods-funding-and-quadratic-voting
Blog
Why Adversarial Coordination Is Inevitable in Open Systems
An examination of the fundamental economic and game-theoretic forces that make adversarial coordination a guaranteed outcome in permissionless networks, with a focus on public goods funding mechanisms like quadratic voting and retroactive grants.
introduction
THE COORDINATION PROBLEM
The Inevitable Adversary
Open, permissionless blockchains structurally incentivize adversarial coordination, making it a feature, not a bug.
This coordination is economically rational, not malicious. Entities like Flashbots and Jito Labs exist to optimize this process, creating private orderflow channels and efficient block building that centralizes around profit.
The counter-intuitive insight is that suppressing this force creates worse outcomes. Attempts to hide transaction intent, as with Taichi Network or encrypted mempools, simply shift coordination to more opaque, less accountable venues.
Evidence: Over 90% of Ethereum and Solana blocks are built by professional searcher-builder networks. This proves coordination is the equilibrium state in systems where value is transparent and execution is competitive.
key-trends
WHY COORDINATION IS INEVITABLE
The Adversarial Playbook: Three Emerging Patterns
Open, permissionless systems create predictable economic incentives for attackers to collude, not just compete.
01
The MEV Cartel: From Searchers to Cartels
The evolution from solo searchers to sophisticated, vertically-integrated cartels that dominate block production and value extraction.\n- Vertical Integration: Entities like Flashbots and Jito Labs now control >80% of Ethereum & Solana MEV flow, bundling searchers, builders, and relays.\n- Economic Capture: Cartels can implement transaction censorship and extract >99% of arbitrage profits through private orderflow deals with exchanges like Coinbase.
>80%
MEV Dominated
$1B+
Annual Extractable
02
The Oracle Manipulation Syndicate
Coordinated attacks on price feeds and data oracles to trigger cascading liquidations across DeFi.\n- Cross-Protocol Targeting: A single manipulated Chainlink or Pyth feed can drain billions in TVL from protocols like Aave and Compound simultaneously.\n- Liquidation Cascades: Attackers use flash loans to create artificial price deviations, triggering auto-liquidation bots they control, creating a self-reinforcing feedback loop.
~500ms
Attack Window
$100M+
Per Incident Risk
03
The Governance Grift: Protocol Capture
The systematic acquisition of governance tokens to hijack protocol treasuries and upgrade mechanisms.\n- Vote-Buying Cartels: Entities like Wintermute and Jump Crypto amass tokens to pass proposals that drain protocol-owned liquidity or mint infinite tokens.\n- Upgrade Hijacking: Once control is established, attackers can push malicious upgrades, as seen in the Beanstalk and Mango Markets exploits, stealing $100M+ in minutes.
51%
Token Threshold
10x ROI
Typical Grift
thesis-statement
THE GAME THEORY
First Principles: Why Coordination Is Guaranteed
Open financial systems create predictable profit opportunities that rational actors will inevitably exploit.
Profit-seeking is rational. In a permissionless system, any actor with capital will execute strategies that guarantee positive returns. This is not malfeasance; it is the Nash equilibrium of an open, transparent ledger.
Coordination is a force multiplier. Individual arbitrage is limited. Adversarial coordination between searchers, builders, and validators (e.g., via MEV-Boost or private mempools) captures exponentially more value, as seen in Ethereum block construction.
Infrastructure enables cartels. Tools like Flashbots' SUAVE or shared orderflow auctions don't just facilitate coordination; they institutionalize it, creating persistent, optimized networks that outcompete isolated actors.
Evidence: Over 90% of Ethereum blocks are built by a coordinated cartel of builders and relays, proving that adversarial coordination is the system's dominant, stable state.
WHY IT'S INEVITABLE
Casebook of Adversarial Coordination
Comparative analysis of coordination mechanisms in open, permissionless systems, highlighting inherent vulnerabilities.
| Attack Vector / Property | Permissioned Consortium (e.g., Enterprise Blockchain) | Proof-of-Stake w/ Delegation (e.g., Ethereum, Cosmos) | Proof-of-Work (e.g., Bitcoin pre-2021) |
|---|---|---|---|
Sybil Resistance Mechanism | KYC/Whitelist | Capital-at-Stake (Staked ETH) | Energy Expenditure (Hashrate) |
Primary Coordination Surface | Legal Contracts & Governance | Staking Pools & MEV Supply Chain | Mining Pools & Geopolitical Energy Access |
Dominant Attack Type | Insider Collusion | Cartel Formation (e.g., Lido, Jito) & MEV-Boost Relay Manipulation |
|
Cost of Attack (Relative) | High Legal/Reputational Cost | ~$34B to acquire 33% of staked ETH (as of May 2024) | ~$20B+ in hardware & operational capex for 51% of Bitcoin |
Coordination Inevitability Thesis | Collusion is structurally simple for a small, known set. | Staking yields and MEV profits create natural pressure towards centralization in pools/relays. | Profit maximization inevitably pools hashpower; seen with Foundry, Antpool >55% combined. |
Real-World Manifestation | Consortium deadlock or fork. | Proposer-Builder-Separation (PBS) creating builder cartels. | Mining pool consolidation leading to repeated >51% thresholds. |
System's Response | Off-chain legal arbitration. | In-protocol slashing & social consensus (fork choice). | Neutral protocol rules; defense is miner exit to other pools. |
deep-dive
THE INEVITABILITY THESIS
The Futility of Naive Defense
Adversarial coordination is a thermodynamic law for open systems, not a bug to be patched.
Adversarial coordination is inevitable. Permissionless systems like Ethereum or Solana create a public state machine. Any actor can read the state, compute a profitable strategy, and execute it. This creates a permanent, automated incentive for attackers to form coalitions, as seen in MEV extraction via Flashbots.
Static defense is a losing game. Hard-coded rules in protocols like Uniswap V2 are predictable. Attackers optimize around fixed parameters, leading to exploits like sandwich attacks. This creates a reactive cycle where protocols like Aave must constantly patch after losses.
The attacker's advantage is structural. Defenders must secure all vectors; an attacker needs one. This asymmetry makes total security impossible. Projects like OlympusDAO learned this when their treasury bonding mechanics were gamed for predictable profits.
Evidence: Over $3 billion was extracted via MEV in 2023 (Flashbots data), proving adversarial coordination is the dominant economic force, not an edge case.
FREQUENTLY ASKED QUESTIONS
Frequently Contested Questions
Common questions about the inevitability of adversarial coordination in open blockchain systems.
Adversarial coordination is when independent actors collude to exploit a system's rules for profit, a fundamental feature of permissionless blockchains. Unlike a single hacker, it involves groups like MEV searchers forming cartels to front-run trades or validators in a Proof-of-Stake network like Ethereum colluding to censor transactions. This behavior is not a bug but an emergent property of open, incentive-driven systems.
takeaways
WHY ADVERSARIAL COORDINATION IS INEVITABLE
Architectural Imperatives
Open, permissionless systems cannot rely on trusted third parties, forcing them to architect for adversarial participation from first principles.
01
The Byzantine Generals Problem Is Your Foundation
Distributed consensus is the core challenge of open systems, where participants may be faulty or malicious. Protocols like Bitcoin's Nakamoto Consensus and Ethereum's LMD-GHOST are solutions that make coordination under adversarial conditions possible.\n- Key Benefit: Achieves state agreement without a central authority.\n- Key Benefit: Tolerates up to 1/3 to 1/2 of participants acting maliciously, depending on the model.
>51%
Honest Majority
~13s
Block Time (Eth)
02
MEV: The Market for Block Space Is Adversarial
Maximal Extractable Value is not a bug; it's an emergent property of transparent mempools and decentralized block production. It creates a coordination game between searchers, builders, and validators, formalized by systems like Flashbots' SUAVE.\n- Key Benefit: Transforms chaotic front-running into a credibly neutral auction.\n- Key Benefit: Protocols like CowSwap and UniswapX use intents to shield users from this adversarial landscape.
$1B+
Annual MEV
-99%
Failed Arb Txs
03
Bridges Must Assume All Chains Are Hostile
Cross-chain communication layers like LayerZero, Axelar, and Wormhole operate in a zero-trust environment. They cannot rely on the security of any single chain and must architect for the failure or censorship of connected domains.\n- Key Benefit: Economic security via bonded relayers or optimistic verification.\n- Key Benefit: Liveness guarantees through decentralized oracle networks and fallback mechanisms.
$2B+
Bridge TVL
~3 mins
Optimistic Delay
04
Decentralized Sequencers Are a Coordination Game
Rollups initially centralize sequencing for efficiency, but decentralization reintroduces the adversarial coordination problem. Solutions like shared sequencer networks (e.g., Espresso, Astria) and based sequencing compete to order transactions without trust.\n- Key Benefit: Censorship resistance via permissionless block building.\n- Key Benefit: Interoperability through atomic cross-rollup composability.
~100ms
Slot Time
0
Trusted Parties
05
DA Layers: Data Availability Is a Consensus Problem
Scaling requires separating execution from data availability, creating a new adversarial frontier. Celestia, EigenDA, and Avail provide secure DA by ensuring data is published and available for fraud proofs, a problem reducible to sampling and erasure coding.\n- Key Benefit: Scalability via ~MB/s data throughput.\n- Key Benefit: Cost reduction by ~100x versus calldata on L1.
~100x
Cheaper than L1
Light Nodes
Verification
06
The Oracle Problem: Trusting the Outside World
Smart contracts are blind. Bringing in external data (price feeds, randomness) via Chainlink, Pyth, or API3 requires creating a decentralized system that is resilient to data manipulation and provider downtime.\n- Key Benefit: High-frequency updates with ~400ms latency.\n- Key Benefit: Cryptographic proofs (e.g., zk-proofs from RedStone) for verifiable data.
$10B+
Secured Value
>50
Data Feeds
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall