Do Private Transaction Relays Guarantee Zero Front-Running Risk?
No, private transaction relays significantly reduce, but do not guarantee, zero front-running risk. While they prevent general mempool bots from seeing the transaction, the validator or block builder who receives the private transaction still has knowledge of the pending order.
This means the validator itself could potentially front-run the transaction, a practice known as 'validator front-running' or 'miner extracted value' (MEV). Solutions like Proposer-Builder Separation (PBS) and encryption aim to mitigate this residual risk.
Glossar
Private Transaction Relays
Relay ⎊ Private Transaction Relays (PTRs) represent a paradigm shift in cryptographic transaction routing, particularly relevant within decentralized finance (DeFi) and options trading ecosystems.
Private Transaction
Privacy ⎊ A Private Transaction is a cryptographic operation submitted directly to a block builder or validator, bypassing the public mempool where pending transactions are typically exposed to all network participants.
Validator Front-Running
Mechanism ⎊ Validator front-running, within decentralized systems, represents a form of market manipulation where an actor leverages privileged access to pending transactions to strategically position their own transactions for profit.
Mempool Bots
Arbitrage ⎊ Mempool bots represent automated trading systems designed to exploit fleeting discrepancies in cryptocurrency pricing across exchanges, specifically targeting unconfirmed transactions within the mempool.