"Transparency is one of the foundational features of blockchains, but it enabled value extraction by controlling the order and inclusion of transactions within a block, known as MEV, or maximal extractable value. This problem is common on most blockchains and is rooted in the public nature of mempools, a ledger that stores pending transactions data. This information allowed block producers and other actors to benefit from frontrunning transactions."
"Among a range of MEV mitigation measures, several cryptographic solutions have been proposed, including threshold encryption and homomorphic encryption. These techniques encrypt transaction contents before they enter the mempool and keep them concealed until the ordering of transactions is finalized. This keeps block producers from extracting MEV by manipulating the sequencing of transactions. However, most encrypted mempool architectures are at the research stage. Shutter was the first threshold-encryption protocol designed specifically to tackle MEV."
Blockchains' public mempools expose pending transactions, enabling actors to control order and inclusion to extract maximal extractable value (MEV). MEV is common across chains and notably severe on Ethereum, where extraction equals roughly 11% of block rewards; nearly $300,000 was lost to sandwich attacks in September. MEV functions as a recurring hidden fee that disproportionately harms large trades in volatile markets. Cryptographic countermeasures proposed include threshold encryption and homomorphic encryption, which encrypt transaction contents before mempool entry and reveal them only after ordering finalization. Shutter implemented threshold encryption in production on Gnosis Chain, using distributed key generation and private key shares for committee members. Users encrypt transactions with the committee public key and submit ciphertexts to the network.
Read at cointelegraph.com
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