Briefing
This paper addresses the fundamental problem of information asymmetry in transaction ordering, which fuels Maximal Extractable Value (MEV) extraction, by proposing a new cryptographic primitive ∞ Threshold-Encrypted Mempools. The foundational breakthrough is the use of a Distributed Key Generation (DKG) scheme to encrypt all pending transactions. This ensures that only a threshold of decentralized key-share holders can collectively decrypt the content after the block producer has committed to the transaction order. The most important implication is the creation of a provably fair, first-come-first-served ordering environment, which fundamentally shifts value from extractors back to the users and the protocol itself, stabilizing the entire architecture.
Context
The established theory of decentralized transaction processing has long been plagued by the inherent limitation of the public mempool model. Before this research, the prevailing challenge was the fundamental information asymmetry ∞ transactions are broadcast in plaintext, allowing block producers and specialized searchers to read, reorder, insert, or censor profitable transactions. This practice of MEV extraction, while economically rational, transforms the decentralized ordering process into a high-stakes, opaque auction, which centralizes profit and introduces systemic instability and unfairness into the core protocol layer.
Analysis
The core mechanism introduces a mandatory three-phase commit-reveal process enforced by cryptography. Users first encrypt their transactions using a public key derived from a Distributed Key Generation (DKG) scheme, submitting content-opaque ciphertexts to the mempool. The block producer then orders these encrypted transactions based solely on non-content metrics like gas price or arrival time and commits to this sequence in the block header. Only after this commitment is finalized does the DKG committee, a set of decentralized key-share holders, collaboratively perform a threshold decryption.
This reveals the content for execution. The new primitive is the cryptographically enforced separation of the ordering decision from the content knowledge. This fundamentally differs from previous approaches by eliminating the block producer’s ability to front-run or sandwich transactions, as the profit potential is concealed until the order is immutable.
Parameters
- Decryption Latency Overhead ∞ 4.5% increase in average block finalization time. This represents the measured cost of the DKG committee’s collaborative decryption process added to the standard block production time.
- Decryption Threshold ∞ t of n participants. This is the minimum number of decentralized key-shares (t) required to successfully decrypt the transactions, providing robust security against up to t-1 malicious or offline participants.
Outlook
The immediate next step is the implementation of this primitive in a live test environment to rigorously measure its real-world latency impact and the economic stability of the DKG committee. In the next 3-5 years, this theory could unlock a new generation of decentralized exchanges and lending protocols where MEV is a non-factor, enabling complex financial applications to operate with guaranteed execution fairness and lower user costs. This research opens new avenues for studying the game theory of decentralized key management and its application to other problems requiring verifiable commitment across distributed systems.
Verdict
This mechanism design establishes a new cryptographic baseline for transaction fairness, fundamentally challenging the economic structure of all current high-throughput decentralized systems.
