Proof of Encryption Eradicates MEV, Securing Fair, Private Blockchain Transactions ∞ Research

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Briefing

The core research problem addressed involves the pervasive issue of Maximal Extractable Value (MEV) and the inherent lack of transaction privacy on public blockchains, which deters institutional adoption and limits advanced decentralized applications. The foundational breakthrough is the introduction of Proof of Encryption (PoE), a novel consensus mechanism that encrypts all transactions before they enter the blockchain and keeps them sealed until after finalization. This mechanism, powered by the Blockchain Integrated Threshold Encryption (BITE) protocol, fundamentally eliminates the visibility window exploited by MEV, ensuring fair and private transaction settlement. The most important implication is the creation of a secure and private foundation for on-chain finance, enabling institutional participation, secure AI agent operations, and the development of truly fair decentralized markets, thereby unlocking significant latent capital and expanding blockchain’s utility.

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Context

Before this research, public blockchains like Bitcoin and Ethereum, while foundational for digital money and programmable finance, exposed all transaction data in plaintext during consensus. This transparency, while enabling auditability, created a systemic vulnerability to Maximal Extractable Value (MEV) extraction. MEV, which involves validators or block builders reordering, censoring, or inserting transactions to profit from on-chain activity, has acted as an invisible tax on users, draining billions annually and hindering the deployment of institutional capital and sophisticated strategies onto decentralized networks. Existing solutions often relied on off-chain tools or opt-in services, which were fragmented and failed to address the root cause at the protocol level.

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Analysis

The paper’s core mechanism, Proof of Encryption (PoE), fundamentally redefines transaction processing by embedding encryption directly into the consensus layer. This new primitive, powered by the Blockchain Integrated Threshold Encryption (BITE) protocol, ensures that every transaction is encrypted at its creation, remains sealed through the mempool and consensus validation, and is only decrypted post-finalization. This “commit-then-reveal” design differs fundamentally from previous approaches where transaction details are visible to validators and block builders before inclusion, allowing for MEV extraction.

By removing this transparency window, PoE ensures that validators process blocks without knowing their contents, thereby eliminating front-running and other forms of MEV at the protocol level. The architecture extends SKALE Consensus, a production-grade asynchronous Byzantine agreement protocol, with threshold encryption to achieve both high throughput and MEV-proof execution.

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Parameters

Core Concept ∞ Proof of Encryption (PoE)
New System/Protocol ∞ FAIR Blockchain
Underlying Cryptographic Primitive ∞ Blockchain Integrated Threshold Encryption (BITE)
Consensus Foundation ∞ SKALE Consensus (Asynchronous Byzantine Agreement)
Primary Benefit ∞ MEV Elimination
Key Feature ∞ Encrypted Transaction Settlement
Targeted Use Cases ∞ Encrypted DeFi, Institutional Adoption, Agent-Native AI
Publication Date ∞ September 9, 2025

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Outlook

This research opens new avenues for blockchain architecture and security, particularly in fostering trustless environments for sensitive on-chain operations. Future steps involve the broader adoption of PoE within decentralized finance, enabling leak-free vaults and private trading strategies. In 3-5 years, this theory could unlock widespread institutional capital deployment onto public rails, facilitating confidential workflows with regulatory auditability.

Furthermore, it paves the way for truly autonomous and secure AI agents that can manage portfolios and execute complex strategies without exposing their underlying logic, fostering a new era of agent-native infrastructure. The research also encourages further exploration into integrating similar cryptographic primitives into other consensus mechanisms to enhance privacy and fairness across the broader blockchain ecosystem.

This research establishes a foundational cryptographic primitive that profoundly reconfigures blockchain security, fundamentally eliminating Maximal Extractable Value and enabling unprecedented on-chain privacy for sophisticated applications.

Signal Acquired from ∞ skale.space