MEV's Economic Limits Challenge Blockchain Scaling → Research

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Briefing

Maximal Extractable Value (MEV) has emerged as the primary constraint on blockchain scalability, with inefficient on-chain searching consuming significant network capacity. This research from Flashbots introduces a novel MEV auction design to address this economic congestion. The proposed mechanism replaces gas-based bidding with a two-part system, incorporating programmable privacy for searchers. This theoretical shift aims to reallocate network resources, fostering a more efficient and equitable distribution of value across the ecosystem.

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Context

Prior to this research, the prevailing approach to blockchain scaling primarily focused on technical throughput enhancements, such as database sharding and Layer-2 rollups. Despite these advancements, economic congestion persisted, driven by the competitive “spam auction” market structure of MEV extraction. This resulted in a significant portion of newly added blockspace being consumed by speculative bot activity, diminishing the practical benefits for end-users and increasing transaction costs.

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Analysis

The core innovation involves a redesigned MEV auction, moving beyond the current gas-based bidding system. This new mechanism grants searchers programmable privacy, allowing them to submit explicit, off-chain bids for transaction ordering. Trusted-execution environments play a crucial role, revealing user flows without enabling frontrunning.

This architecture channels the extracted value back to validators and users, establishing a more transparent and fair market for transaction inclusion. The design fundamentally alters the economic incentives within block production.

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Parameters

Core Concept → Redesigned MEV Auction
Proposed Mechanism → Programmable Privacy Order Flow
Problem Addressed → Economic Congestion in Blockchain Scaling
Key Impact Metric → Effective Gas Throughput
Research Organization → Flashbots
Publication Date → June 15, 2025
Pre-existing System → Gas-based Bidding
Primary Platform Focus → Ethereum and L2 Rollups

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Outlook

This research opens new avenues for achieving genuine blockchain scalability by tackling its economic underpinnings. The proposed MEV auction and programmable privacy could unlock significant congested capacity, leading to reduced transaction fees and expanded headroom for decentralized applications. Future research will likely focus on the practical implementation of these privacy-preserving auction designs and their integration into diverse blockchain architectures.