MEV Protection

This cryptographic technique separates the act of committing to a transaction from its execution. A user first submits a commitment (a hash of their intent) to the chain. Later, they reveal the full transaction details. This prevents front-running because the actual trade parameters remain hidden until the reveal phase, at which point it's too late for bots to insert themselves.

FSS protocols act as decentralized sequencers that order transactions based on objective criteria like time of receipt, rather than fee size. By enforcing a first-come, first-served or a randomized order, they neutralize the advantage of bots that can pay higher gas fees to jump the queue. This is a core feature of many Layer 2 rollups and dedicated protocols.

A fundamental user-level defense. Slippage tolerance sets the maximum acceptable price movement for a swap; if exceeded, the transaction fails, thwarting sandwich attacks. Transaction deadlines cause a tx to expire if not mined within a set time, preventing it from being held in the mempool and targeted. While simple, these are critical parameters in any DEX interface.

A more advanced cryptographic approach where transactions are encrypted before being sent to the network. A decentralized committee of validators or sequencers holds decryption keys and only reveals the transaction contents after the block ordering is finalized. This guarantees transaction privacy during the ordering phase, making front-running computationally impossible.

Most MEV protection systems, like commit-reveal schemes or private mempools, introduce latency. A user's transaction is delayed while it is encrypted, aggregated, or processed in a private order flow auction. This creates a direct conflict: stronger privacy guarantees often mean slower settlement times, which is unsuitable for time-sensitive arbitrage or liquidations.

Reliance on a single searcher, block builder, or relay for protection can create central points of failure. If a dominant private transaction service (PBS relay) censors transactions or is compromised, user protection fails. This shifts trust from the decentralized validator set to a smaller set of specialized, potentially collusive, intermediaries.

Protocols that redistribute extracted MEV back to users (e.g., via MEV burn or MEV smoothing) must carefully design their incentive mechanisms. Flaws can lead to:

• Staker centralization if rewards are unevenly distributed.
• New attack vectors where attackers manipulate the redistribution mechanism for profit.
• Ineffective protection if the economic cost to attackers is too low.

Integrating MEV protection (e.g., encrypted mempools, threshold decryption) adds significant complexity to core protocol or client software. This expanded attack surface increases the risk of critical bugs, such as encryption flaws that leak transaction data or implementation errors that allow searchers to bypass protection entirely.

Proposer-Builder Separation (PBS) and order flow auctions aim to democratize MEV capture but have inherent limits:

• They cannot prevent in-block MEV like sandwich attacks within a single block.
• They may encourage builder collusion to form dominant cartels.
• They require widespread adoption by wallets and users to be fully effective, creating a network effect challenge.

For end-users, the guarantees of "MEV protection" are often opaque. It is difficult to:

• Verify that a transaction was actually protected.
• Audit the behavior of private relay services.
• Quantify the true cost, as protection may come with higher fees or worse price execution hidden from the user.

The core adversarial action MEV protection guards against. It occurs when a searcher or validator observes a pending transaction in the mempool and submits their own transaction with a higher gas fee to execute first, profiting at the original user's expense. This is a primary form of sandwich attack.

A class of protocols designed to prevent temporal MEV by establishing a canonical, fair order for transactions before they are executed. Instead of first-seen ordering in a public mempool, FSS uses techniques like commit-reveal schemes or cryptographic sequencing to neutralize frontrunning and time-bandit attacks within a defined domain (e.g., a rollup).

A specialized actor in the MEV supply chain who uses algorithms to scan the mempool for profitable MEV opportunities, such as arbitrage or liquidations. They construct bundle or MEV-Block transactions and submit them to builders or validators via relays, competing based on the bid they pay for inclusion.

A specialized block producer in proposer-builder separation (PBS) architectures like MEV-Boost. Builders compete to construct the most profitable block by aggregating user transactions and searcher bundles. They submit their block header and a fee bid to a relay, and the winning block is proposed by the validator. Builders are central to efficient MEV extraction and distribution.

A cryptographic privacy technique used in MEV protection systems like encrypted mempools. User transactions are encrypted with a public key and only decrypted after they have been included in a block and ordered. This prevents searchers and validators from viewing transaction content in advance, neutralizing frontrunning. Decryption requires a threshold of committee members to prevent censorship.