According to CoinDesk, a growing number of sophisticated Ethereum users are opting for private transactions on the blockchain to avoid trading bots designed to front-run transactions. This trend, however, may obscure the openness and transparency that are supposed to be hallmarks of decentralized public networks.
New research from Blocknative, a company specializing in minimizing the impact of maximal extractable value (MEV), reveals that private transactions now account for about half of the total gas usage on Ethereum. This is a significant increase from about 7% in September 2022, when Ethereum transitioned to a proof-of-stake network, and has surged from around 15% at the start of 2024.
Private transactions are sent directly to validators or block proposers instead of public mempools. This trend means that private transaction order flow is only accessible to permissioned network participants, potentially centralizing the network as a smaller number of sophisticated players reap more rewards. Blocknative CEO Matt Cutler noted that this creates opportunities and advantages for those who can see the private flow.
While the more typical way of measuring private activity is by transaction count, which is currently around 30%, private transactions tend to be more complex and gas-intensive. By focusing on the amount of gas used by private transactions, Blocknative argues that a more accurate understanding of network dynamics is achieved.
One disadvantage for users transacting publicly is the volatility and unpredictability of fee rates, which fluctuate based on network demand. Cutler emphasized that only certain actors, like block builders, have exclusive access to network information, giving them a significant edge.
