How Batched Threshold Encryption could end extractive MEV and make DeFi fair again

"On most modern blockchains, transaction data is publicly viewable in the mempool before it is sequenced, executed and confirmed in a block. This transparency creates avenues for sophisticated parties to engage in extractive practices known as Maximal Extractable Value (MEV). MEV exploits the block proposer's ability to reorder, include or omit transactions for financial gain."

"Some researchers have sought to prevent MEV with mempool designs, where pending transactions are held encrypted until block finalization. This prevents other blockchain participants from seeing what trades or actions the transacting users are about to take. Many encrypted mempool proposals use some form of threshold encryption (TE) for this. TE splits a secret key that can unveil the transaction data among several servers."

"Batched Threshold Encryption (BTE) builds on foundational concepts such as threshold cryptography, which enable secure collaboration among multiple parties without exposing sensitive data to any single participant. BTE is an evolution of the earliest TE-encrypted mempool schemes, such as Shutter, which we have covered previously."

Batched Threshold Encryption builds on threshold cryptography principles to enable secure multi-party collaboration without exposing sensitive data. Modern blockchains display transaction data publicly in mempools before execution, creating opportunities for MEV exploitation through frontrunning and sandwich attacks. During Ethereum's October flash crash, approximately $2.9 million was extracted, with roughly 32% of attacks privately relayed. Encrypted mempool designs using threshold encryption prevent participants from viewing pending transactions by splitting decryption keys among multiple servers, requiring minimum collaboration to unlock data. BTE represents an evolution of earlier TE-encrypted mempool schemes like Shutter, currently existing only at prototype and research stages but offering significant potential for shaping decentralized ledger futures.

Read at Cointelegraph