A growing number of advanced Ethereum users are choosing to transact privately on the blockchain – relying on so-called dark pools to avoid trading bots that are set up to execute front-run trades but potentially obscure the openness and transparency that should be characteristic of decentralized action. public networks.
That’s according to new research compiled by Blocknative, a company that specializes in preventing or minimizing the impact of MEV, which stands for ‘maximum extractable value’ – the profits that can be siphoned off by fast-moving software bots that can quickly enter into trades to extract margin skims of transactions sitting in the network’s public queue, waiting to be processed.
Private transactions, which are sent directly to validators or block proposals, rather than to public mempools, now account for about half of the total on Ethereum, in terms of total gas consumption – reflecting the computing power required to process transactions. The rate was around 7% in September 2022, when Ethereum transitioned to a proof-of-stake network, but this year it has taken off, up about 15% since early 2024.
One consequence of the trend is that “private transaction order flows are only accessible to consent network participants,” which could be a centralizing force if a smaller number of sophisticated players reap more of the benefits, Blocknative wrote in a blog post discussing the findings.
“You have a small number of actors who can see the private stream,” Blocknative CEO Matt Cutler said in an interview. “Certain people can see things, and certain people can’t, and that creates opportunities and benefits.”
The data may not look like professionals who have previously observed such statistics. The more typical way to measure the prevalence of private activity is to count the number of transactions, which is currently about 30%. In 2022, that share was even closer to 4.5%.
But private transactions are usually more complex and therefore more ‘gas intensive’, according to Blocknative.
“By shifting the focus to the amount of gas used for private transactions, we gain a more accurate understanding of network dynamics,” Blocknative wrote in the post.
One of the downsides for users transacting publicly is that rates, which fluctuate based on network demand, can be more volatile and highly unpredictable, Cutler said.
“Only certain actors, like the block builders, can see what’s happening in the network,” Cutler said. They have “exclusive access to certain information. That gives you an edge. It’s a great fact of life.”