Batch Processing Eliminates MEV in Automated Market Makers → Research

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Briefing

This foundational research addresses the critical problem of Miner Extractable Value (MEV) within Automated Market Makers (AMMs), a pervasive issue undermining fairness and economic security in decentralized finance. The paper proposes a novel mechanism that processes all transactions within a block in a batch, thereby eliminating arbitrage opportunities and ensuring equitable treatment for all participants. This theoretical advancement significantly enhances the integrity of on-chain trading, paving the way for more robust and trustworthy blockchain architectures by disincentivizing malicious validator behavior.

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Context

Prior to this research, Automated Market Makers, while central to decentralized finance, grappled with inherent vulnerabilities to Miner Extractable Value. The prevailing theoretical limitation centered on the ability of block producers (miners or validators) to exploit their control over transaction ordering, leading to front-running, back-running, and arbitrage opportunities. This allowed for risk-free profit extraction, compromising the fairness of AMM exchanges and introducing systemic economic inefficiencies that challenged the very principles of decentralized and permissionless systems.

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Analysis

The paper’s core mechanism introduces a batch-processing approach for transactions within Automated Market Makers. Instead of sequential processing, which allows for reordering attacks, all transactions submitted within a block are treated as a single unit and settled simultaneously. This fundamental shift ensures that a block producer cannot gain an advantage by manipulating transaction order, effectively eliminating arbitrage opportunities.

The mechanism achieves “arbitrage resilience” for traditional single-miner blockchains and “incentive compatibility” for more decentralized, sequencing-fair block proposal systems, ensuring that participants’ optimal strategy aligns with honest behavior. This fundamentally differs from previous approaches by addressing the root cause of MEV in AMMs through a structural change in transaction settlement, rather than attempting to merely detect or redistribute extracted value.

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Parameters

Core Concept → Batch Transaction Processing
Key Guarantees → Arbitrage Resilience, Incentive Compatibility
Target System → Automated Market Makers (AMMs)
Problem Addressed → Miner Extractable Value (MEV)
Key Authors → T-H. Hubert Chan, Elaine Shi et al.
Publication Date → September 13, 2025 (v3)

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Outlook

This research opens new avenues for designing more robust and fair decentralized exchanges, extending beyond current AMM models. The principles of batch processing and incentive-compatible mechanism design could be applied to a broader range of on-chain protocols, fostering environments where economic agents are naturally aligned with system integrity. Future research may explore the integration of these batching mechanisms with advanced privacy-preserving technologies or their application in cross-chain liquidity solutions, ultimately unlocking more equitable and efficient decentralized financial markets within the next three to five years.

This research delivers a decisive theoretical framework for mitigating systemic economic vulnerabilities in decentralized finance, fundamentally enhancing the integrity and fairness of blockchain-based trading.

Signal Acquired from → arXiv.org