MEV and the Dark Forest: Why We Need Privacy in Blockchain

Hunting for victims in Ethereum’s public mempool, automated searchers prey on transactions as they are discovered in a practice called MEV

article-image

OP38Studio/Shutterstock modified by Blockworks

share

Lurking in what is sometimes referred to as the “Dark Forest,” programmed predators seize value from unknowing victims as they attempt to perform blockchain transactions. 

The concept of a “Dark Forest” originates from a novel written by Cixin Liu, describing a setting in which the discovery of someone’s location portends their inevitable doom at the hands of sophisticated predators. It is often compared to Ethereum’s hostile and murky block-building environment. 

Hunting for victims in Ethereum’s public mempool, automated searchers prey on transaction orders as they are discovered in a practice called MEV, extracting value from their targets’ activities through frontruns and sandwich attacks.

In an interview with Blockworks on a recent Bell Curve podcast, Hasu, strategy lead at Flashbots, spoke with host Mike Ippolito about the necessity of building privacy mechanisms to protect users from MEV exploits.

The quest for privacy

“I would say there are three different camps in crypto, when it comes to privacy, that have very different motivations,” Hasu says. First on his list is the “ideologically-driven crowd,” motivated primarily by the principle of privacy as a human right.

Secondly, Hasu says, a more “academic camp” of curious, privacy-focused crypto researchers study zero knowledge, cryptography, and trusted execution environments in their quest for improving privacy.

“They are in it,” he says, “for the intellectual challenge.”

The third camp consists of mechanism and market structure designers, Hasu explains, who strive for privacy to build “credible mechanisms that work.” As strategy lead at Flashbots, Hasu identifies himself as one such builder.

Privacy, Hasu says, is “extremely important when you want to build a good market structure.” This is especially the case in the MEV supply chain, he says. “Privacy is very important because there’s a lot of informational value in the bids.”

“Just seeing the intent of a person, what they want to do,” he says, gives the searcher “a financial edge because you can frontrun them” and “do harm to them.”

Hasu believes that privacy is also crucial for successful collaboration in the building process. “We want validation and block production to be decentralized.” 

Centralized actors who could monopolize the MEV supply chain would wield extraordinary power, he says. Instead, he advocates for a broader distribution of smaller searchers and block builders to collaborate in the block-building process.

“This collaboration doesn’t work without strong privacy because you always have to be very aware that others can steal your bundles and steal money from you.”

“Privacy is of fundamental importance for the MEV supply chain,” Hasu says, noting, “We couldn’t achieve our goals” without solving “the privacy puzzle.”

MEV-Share

Ippolito mentions the privacy innovations of Flashbots’ MEV-Share tool as an example, which enables users to “directly control which parts of their transaction they wish to share with searchers.”

Hasu explains that with MEV-Share, searchers are limited in their ability to see information about user orders, protecting the transactions from MEV exploitation.

“We reveal some amount of information, not enough to frontrun, but just enough to constrain the search space, so that searchers are not completely blind.”

The block builders in this system, Hasu explains, are in charge of “running this simulation and matching the orders.” 

“For searchers, it’s a completely new paradigm,” he says. “Searching on private data is not what they’re used to, but we think it yields fundamentally better outcomes for users.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

Research Report Templates.png

Research

An overview of the Base Ecosystem, with a focus on market leaders.

article-image

Although bitcoin hitting $120k by year’s end is looking unlikely

article-image

About 270 million HYPE has been claimed, valued around $7.6 billion

article-image

Stanford professors David Mazières and Dan Boneh will lead the lab alongside a cohort of graduate student researchers

article-image

With more companies holding BTC, bitcoin yielding strategies could become “a new corporate finance norm,” CoinShares posed

article-image

The proposal comes after Polygon governance considered a controversial use of bridged liquidity for yield

article-image

Can the community balance its decentralized ethos with the need for inclusivity and constructive debate?