Private orderflow refers to transaction requests submitted directly by traders to market makers or block builders, bypassing public order books or mempools. This arrangement allows large trades to execute without immediately revealing their intent to the broader market, potentially reducing price impact and avoiding front-running. It operates outside the transparent, public queuing mechanisms.
Context
The existence and growth of private orderflow are significant topics in discussions about market structure, fairness, and maximal extractable value (MEV) in decentralized exchanges. News often reports on debates concerning whether private orderflow benefits market efficiency or exacerbates information asymmetries. Regulators and protocol designers are exploring ways to balance its advantages with the principles of transparency and equitable access.
Game theory proves private orderflow and latency asymmetries drive MEV-Boost to an oligopoly equilibrium, requiring new trustless orderflow mechanisms.
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