How Does a ‘Private Transaction Pool’ Attempt to Mitigate MEV?
A Private Transaction Pool, often called a private mempool, allows users to submit their transactions directly to a block builder or validator without first broadcasting them to the public mempool. This prevents 'searchers' and attackers from seeing the transaction and front-running it.
By keeping the order flow private until inclusion in a block, the pool effectively eliminates the information asymmetry that enables MEV attacks like sandwiching.
Glossar
Private Transaction Pool
Pool ⎊ A Private Transaction Pool (PTP) represents an off-chain aggregation of cryptocurrency transactions, distinct from public blockchains or order books.
Transaction Pool
Integrity ⎊ The pool serves as the initial staging area where all broadcast, unconfirmed transactions reside, representing the current order book for block inclusion.
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.
Information Asymmetry
Distortion ⎊ Information Asymmetry within cryptocurrency, options, and derivatives markets arises from the inherent complexities of valuation and the decentralized nature of many underlying assets, creating opportunities for informed traders to exploit discrepancies in price discovery.
Block Builder
Architecture ⎊ Block Builder, within cryptocurrency and financial derivatives, represents a foundational layer for constructing complex trading strategies and decentralized applications.