Skip to main content

​
Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges

This foundational paper presents an extensive investigation into the phenomenon of Maximal Extractable Value (MEV) in the context of decentralized exchanges. Th

​
Abstract

This foundational paper presents an extensive investigation into the phenomenon of Maximal Extractable Value (MEV) in the context of decentralized exchanges. The authors quantify the prevalence of frontrunning, backrunning, and sandwich attacks, documenting how sophisticated actors utilize transaction reordering to extract value from end-users. By analyzing the Ethereum network, the paper demonstrates how the mempool acts as a public information space where participants can observe unconfirmed transactions and insert their own transactions ahead of others for profit. The authors discuss the broader implications for blockchain consensus, arguing that these activities create perverse incentives for miners and validators, potentially leading to chain instability. The study provides a taxonomy of priority gas auctions (PGAs) and explains how these auctions essentially internalize profit-seeking behavior into the consensus layer itself. Beyond just a technical analysis, the paper warns of the social and economic consequences of unmitigated transaction reordering, emphasizing the need for protocol-level defenses and improved awareness of the risks inherent in transparent, permissionless transaction ordering. The work remains a cornerstone for understanding the conflict between decentralized design and profit-motivated transaction ordering. Authors: Philip Daian, Steven Goldfeder, Tyler Kell, Yunqi Li, Xueyuan Zhao, Iddo Bentov, Lorenz Breidenbach, Ari Juels Publication: arXiv preprint Publication date: 2019-01-01

​
Key findings

  • Maximal Extractable Value is an inherent byproduct of decentralized transaction ordering and public mempools.
  • Frontrunning and sandwich attacks extract significant value from retail traders at the protocol layer.
  • Priority gas auctions effectively commoditize transaction ordering to the detriment of network latency.
  • Profit-seeking reordering behaviors can threaten consensus stability by incentivizing chain reorganizations.
  • Mitigation of MEV requires shifts in infrastructure such as batching, threshold encryption, or off-chain transaction services.

​
Citation

Philip Daian, Steven Goldfeder, Tyler Kell, Yunqi Li, Xueyuan Zhao, Iddo Bentov, Lorenz Breidenbach, Ari Juels (2019). Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges. arXiv preprint. https://arxiv.org/abs/1904.05234
Canonical knowledge ID: research:flash-boys-2-0-frontrunning-transaction-reordering-and-consensus-instability-in-decentralized-exchanges