Private Transactions Now Dominate Ethereum Order Flows
Date: 2024-08-21 Author: Henry Casey Categories: BLOCKCHAIN
While private transactions only make up about 30% of the total number of transactions on the Ethereum network, they consume more than half of the gas used on the network, Blocknative said. This shift creates “new vectors of centralization, as only permissioned network participants have access to private transaction flows,” the report said.
Private Transactions and Their Impact on the Network
Private transactions involve sending transactions directly to a validator, in a so-called dark pool, rather than to a public queue. Public transactions are at risk of being frontrun by automated trading “bots” that extract profits at the expense of users, a practice known as maximum extractable value (MEV).
"Users typically choose private transactions to protect themselves from MEV, especially when performing more complex and therefore gas-intensive transactions on the blockchain, such as swaps," Blocknative notes. "These transactions, in turn, consume more gas per transaction than non-MEV transactions."
The Rise of Dark Pools and Its Implications
Private order flow is controlled by a few large block builders, such as Beaver, Titan, Rsync, and Flashbots, which have seen significant growth in private order flow since March, according to Blocknative. Gas consumption by these block builders has increased by 130-150% over that period, the report notes.
The rise of dark pools is having a negative impact on users participating in the public transaction queue.
