MEV and the Rise of Private Orderflow

Broadcasting transactions publicly is an invitation for frontrunning and sandwich attacks. This creates a negative-sum game where user value is extracted by searchers, costing DeFi users ~$1B+ annually in lost value.\n- Latency Arms Race: Searchers invest millions in infrastructure for sub-100ms advantage.\n- User Distrust: Retail users bear the brunt of poor execution, fragmenting liquidity.

Decouples transaction ordering from execution by creating a neutral, decentralized block builder network. Transactions are sent privately to a centralized sequencer for inclusion.\n- Privacy by Default: Orderflow is hidden, preventing frontrunning.\n- MEV Redistribution: Auction revenue can be shared with users or applications, realigning incentives.

Protocols like UniswapX and CowSwap abstract execution away from users. Instead of submitting a transaction, users submit an intent (a desired outcome), which solvers compete to fulfill off-chain.\n- Optimal Routing: Solvers can split orders across DEXs, private pools, and bridges like Across.\n- Cost Absorption: Solvers can internalize MEV, offering users better-than-market prices.

Major dApps are bypassing generalized chains entirely. dYdX (Cosmos) and Aevo (OP Stack) operate their own app-specific rollups with centralized sequencers. This captures 100% of their orderflow and associated MEV.\n- Tailored Execution: Optimize the stack for a single use case (~500ms block times).\n- Revenue Capture: MEV and fees are retained by the protocol treasury and stakers.

Networks like Astria and Espresso provide decentralized sequencing-as-a-service for rollups. Rollups outsource block building while maintaining sovereignty over execution. This creates a liquid market for cross-rollup MEV.\n- Atomic Composability: Enables secure cross-rollup transactions without slow bridges.\n- Economies of Scale: Small rollups access enterprise-grade sequencing without the overhead.

FHE (Fully Homomorphic Encryption) and TEEs (Trusted Execution Environments) enable encrypted mempools. Projects like Fhenix and Aztec allow transactions to be processed without ever being decrypted in a public environment.\n- Absolute Frontrun Resistance: The content of a transaction is cryptographically hidden.\n- Regulatory Arbitrage: Enables compliant DeFi by keeping sensitive data on-chain but private.

Broadcasting transactions publicly before inclusion invites frontrunning, sandwich attacks, and arbitrage bots that extract ~$1B+ annually from users. This creates a toxic UX where retail consistently gets worse prices and failed transactions.

• Latency Arms Race: Builders compete on sub-~100ms speeds, centralizing around privileged infrastructure.
• Censorship Vector: Entities can filter or delay transactions based on content, not just gas.

Shift from transaction execution to outcome declaration. Users submit signed intents (e.g., 'I want X token for Y token at >= Z price'), delegating pathfinding and execution to a competitive solver network.

• MEV Resistance: Solver competition internalizes value, returning it as better prices.
• Gas Abstraction: Users don't submit on-chain txns; solvers batch and settle, enabling cross-chain swaps via protocols like Across and LayerZero.

Projects like Shutter Network and EigenLayer's MEV Blocker use threshold cryptography (e.g., Ferveo) to encrypt transactions until they are included in a block. This neutralizes frontrunning while maintaining chain liveness.

• Builder Integration: Requires buy-in from block builders (e.g., Flashbots SUAVE, Titan) to decrypt and order fairly.
• Key Management: Relies on a decentralized keyholder set, a critical trust assumption for the system's neutrality.

Wallets and dApps (like MetaMask and Uniswap) now auction their users' transaction flow to the highest-bidding block builder or searcher. This commoditizes orderflow and creates a new revenue stream.

• Revenue Share: Protocols can capture value previously lost to searchers.
• Alignment Risk: Incentives must be structured to prioritize best execution, not just highest bid, to avoid becoming a paid frontrunning service.

Ethereum's core roadmap separates block building (competitive, centralized) from block proposal (decentralized, consensus). This is non-negotiable infrastructure for managing MEV.

• Enshrined PBS: Ethereum's design forces builders to compete in an open market, preventing validator-level exploitation.
• SUAVE Vision: Aims to become a decentralized, chain-agnostic block builder and OFA marketplace, abstracting MEV across ecosystems.

Forward-thinking chains (e.g., Berachain, Monad) are designing MEV distribution into their economic models from day one. MEV can be captured and redistributed to stakers or burned, turning a parasitic extract into a sustainable, protocol-owned revenue stream.

• Burn vs. Distribute: A key governance decision impacting tokenomics and security budgets.
• Searcher Ecosystem: Must still be incentivized to provide liquidity and efficient price discovery, not driven away.