Private Auctions

A very brief history of MEV on Ethereum

Though MEV is intrinsically tied to the fundamental design of public, smart-contract-enabled blockchains, it can have negative externalities.

Scenarios where multiple transactions are competing to be the first to modify a specific piece of the Ethereum state can degrade the user experience for everyday users, leading to network congestion, instability, and gas fee spikes.

The solutions:

• The Ethereum ecosystem adopted private auctions (see Proposer Builder Seperation), essentially forcing the competition for blockspace rank offchain. This prevents failed transactions from ever hitting the public chain, keeping gas prices more stable for regular users.
• To improve the experience of those transacting onchain, order flow auctions (OFAs) emerged as intermediaries between tx originators and block builders. OFAs were developed to protect users from front-running and sandwich attacks, and to capture back-running opportunities for those that created the value.