Paper 2023/1461

Do Private Transaction Pools Mitigate Frontrunning Risk?

Agostino Capponi, Columbia University
Ruizhe Jia, Columbia University
Ye Wang, University of Macau
Abstract

Blockchain users who submit transactions through private pools are guaranteed pre-trade privacy but face execution risk. We argue that private pools serve the intended purpose of eliminating frontrunning risk, only if such risk is high. Otherwise, some validators may decide to avoid monitoring private pools to preserve rents extracted from frontrunning bots. Private pools intensify the execution arms race for bots, thus decreasing their payoffs {and increasing validators' rents}. The private pool option reduces blockspace allocative inefficiencies and raises aggregate welfare.

Metadata
Available format(s)
PDF
Category
Applications
Publication info
Preprint.
Keywords
MEVprivate poolblockchain
Contact author(s)
ac38272 @ columbia edu
rj2536 @ columbia edu
yewang ethz @ gmail com
History
2023-09-24: approved
2023-09-24: received
See all versions
Short URL
https://ia.cr/2023/1461
License
Creative Commons Attribution-NonCommercial-ShareAlike
CC BY-NC-SA

BibTeX

@misc{cryptoeprint:2023/1461,
      author = {Agostino Capponi and Ruizhe Jia and Ye Wang},
      title = {Do Private Transaction Pools Mitigate Frontrunning Risk?},
      howpublished = {Cryptology {ePrint} Archive, Paper 2023/1461},
      year = {2023},
      url = {https://eprint.iacr.org/2023/1461}
}
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