Private Gas Auction

A private gas auction (PGA), also known as a private mempool transaction, is a process where a user submits a transaction directly to a specialized block builder or searcher via a secure, off-chain channel. This bypasses the public mempool, where pending transactions are normally visible to all network participants. The user specifies a maximum fee they are willing to pay, and the builder incorporates the transaction into a block proposal, often within a bundle of related transactions, for a fee determined by the private auction. The primary goal is to execute complex DeFi strategies—like arbitrage or liquidation—without revealing intent to front-running bots.

The mechanism operates through a first-price sealed-bid auction. Participants submit their transaction bundles with a confidential bid representing the total tip or priority fee for the builder. The block builder, often a mev-boost relay or a specialized builder like those from Flashbots, evaluates these private bids and selects the most profitable combination of transactions to include in the next block. The winning bid's transaction is then submitted directly to the validator for block proposal. This creates a separate, competitive market for block space that exists in parallel to the standard public gas market.

Key drivers for using private gas auctions are minimizing extractable value (MEV) and improving execution guarantees. By keeping transactions private, users avoid sandwich attacks and other forms of front-running that are prevalent in public mempools. This is critical for large trades or time-sensitive operations in decentralized exchanges. Services like Flashbots Protect and BloXroute's BackRunMe offer infrastructure to facilitate these private auctions, providing users with a shielded path to the chain.

From a network perspective, private auctions have significant implications. They can reduce congestion in the public mempool and potentially lower average gas fees for regular users by moving high-value, fee-driving arbitrage wars off-chain. However, they also contribute to centralization pressures, as sophisticated block builders with access to private order flow gain an advantage. Furthermore, they create a two-tiered system where users who can pay for privacy and priority receive better execution than those relying on the public system.

The evolution of private gas auctions is closely tied to Ethereum's Proposer-Builder Separation (PBS) architecture. In a PBS framework, specialized block builders compete to create the most valuable blocks, which validators then simply propose. Private auctions are the natural marketplace where builders source their most profitable transactions. As blockchain scaling solutions like rollups mature, similar private transaction mechanisms are emerging on Layer 2 networks to manage their own execution environments and fee markets.

A private gas auction is a transaction ordering mechanism where a user submits a transaction directly to a block builder or validator, often via a relay, with a confidential bid for its inclusion in a block. This process occurs entirely outside the public mempool, shielding the transaction's details—such as its content, origin, and the exact gas price bid—from general network visibility. The goal is to prevent MEV (Maximal Extractable Value) extraction strategies like front-running, sandwich attacks, and arbitrage bots that typically monitor the public transaction pool for profitable opportunities.

The auction is typically initiated when a user, often an institution or a trader executing a large order, sends their transaction to a specialized service. This service, acting as a searcher or builder, then participates in a sealed-bid auction with other builders. Each builder assembles a candidate block containing the private transaction alongside others, optimizing for total value, which includes the private bid and any other MEV they can capture. The builder with the most valuable block proposal wins the right to propose it to the network.

Key infrastructure enabling private auctions includes mev-boost relays on Ethereum and similar block builder markets on other chains. These systems separate block building from block proposal. Validators (proposers) receive complete, pre-built blocks from builders via relays and simply choose the most profitable one. This design allows for complex, private order flow without requiring validators to run sophisticated MEV software themselves, though it centralizes block-building power among a few specialized players.

The primary use case is for large-scale DeFi trades where slippage and front-running risk are significant. For example, a hedge fund wanting to swap $50 million of one token for another would use a private auction to prevent the market from moving against its order. By keeping the intent secret and having it appear in a finalized block atomically, the transaction executes at a known price without alerting predatory bots. This provides execution certainty and price improvement compared to public settlement.

Critically, private gas auctions create a two-tiered transaction market: a public one with transparent, slow, and vulnerable transactions, and a private, fast, and expensive one for privileged users. This raises concerns about censorship resistance and fairness, as the ability to pay for privacy and priority is not equally accessible. The evolution of these mechanisms is central to ongoing debates about MEV democratization and the design of proposer-builder separation (PBS) in future blockchain upgrades.

A private gas auction is a multi-step, off-chain process where transaction senders compete for priority inclusion in a block by submitting sealed bids to a block builder. The flow begins when a user signs a transaction and submits it, along with a confidential maximum fee (a bid), to a specialized relay. The relay acts as a trusted intermediary, forwarding the transaction details to a network of block builders without broadcasting them to the public mempool, thus maintaining privacy.

Builders receive these private order flows and compete to construct the most profitable block. They evaluate the sealed bids and other pending transactions, strategically ordering them to maximize their revenue from priority fees while adhering to block space and gas limits. The winning builder's proposed block is then submitted back to the relay, which performs validity checks before forwarding the final block header to a validator (or proposer) for inclusion in the blockchain. The user's transaction is only publicly visible once the block is proposed and finalized.

This flow creates a distinct separation of roles: the user and their wallet, the relay, the builders, and the validator. Key advantages include front-running protection, as transaction details are hidden from general network participants until execution, and efficient price discovery, as bids reflect true demand for block space in a confidential market. The entire auction mechanism is a core component of proposer-builder separation (PBS) architectures, designed to reduce centralization risks in block production.

In practice, visualizing this flow highlights critical trust assumptions and potential points of failure. Users must trust the relay to not censor their transaction and to faithfully deliver it to builders. The system also relies on the relay's attestation that the block from the builder is valid and includes the transaction as promised. This has led to the development of suave and other initiatives aiming to decentralize or minimize the trust required in this relay role.